• GBP/JPY is back in the red after Monday’s sharp rally.
• Omicron cases in the UK keep rising but no restrictions are likely.
• 154.70 is the level to beat for bulls, Monday’s low at 153.30 offers support.

GBP/JPY is posting small losses, retracing from six-week highs of 154.47, although bulls manage to defend the 154.00 level so far this Tuesday.

The cross turned south after facing rejection once again at 154.50, shrugging off the improvement in the market sentiment.

The pound draws support from the UK government’s dismissal of any lockdown restrictions likely to be imposed during the year-end holiday season to curb the growing risks from the Omicron covid variant contagion. The UK recorded 98,515 COVID cases and 143 deaths in the past 24 hours.

 Meanwhile, a minor pullback in the USD/JPY pair, courtesy of the falling Treasury yields, exerts downward pressure on the cross.  

From a short-term technical perspective, GBP/JPY’s 14-day Relative Strength Index (RSI) holds well above the midline, suggesting that the upside potential remains intact in the near term.

Therefore, bulls need to take out the horizontal trendline resistance at 154.70 to resume the recovery rally from sub-150.00 levels.

Acceptance above the latter will call for a test of the November 4 highs of 156.25. Ahead of that the spot will challenge the 155.00 round number.

On the flip side, buyers could find respite at Monday’s low of 153.30 if the pullback gathers steam.

Further south, the downward-sloping 50-Daily Moving Average (DMA) at 153.06 will challenge the bulls’ commitments.

GBP/JPY daily chart

GBP/JPY additional levels to watch