• GBP/JPY retreats from the highest levels since February 2016 as traders pare recent gains amid UK holiday.
• Off in major bond markets, recently hawkish BoJ concerns versus doubts BoE hawks prod pair buyers.
• Risk catalysts are important for clear directions, US debt limit passage is the key.

GBP/JPY bulls take a breather at seven-year high as the UK markets are off due to Memorial Day on Monday, allowing the cross-currency buyers to pare recent gains around 173.50 amid a sluggish start to the key week.

That said, the quote’s latest pullback from the highest levels since February 2016 takes clues from the market’s mixed sentiment, as well as recent hawkish concerns about the Bank of Japan (BoJ). Also exerting downside pressure on the GBP/JPY is the doubt on the Bank of England’s (BoE) capacity to defend the rate hike bias.

The US policymakers’ initial agreement to avoid the debt payment default allows the markets to remain optimistic, favoring the pair’s upside momentum. However, some of the leftists and rightists are against the compromises involved to reach the much-awaited deal, which in turn prods the positive vibes from the development as the agreement needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default.

Elsewhere, Friday’s mostly upbeat UK Retail Sales figures struggle to back the BoE hawks amid looming economic fears and recent easing in the inflation numbers. Furthermore, expectations of the BoJ’s higher rates in the future also weigh on the GBP/JPY price amid the sluggish session.

On a different page, Friday’s retreat in the US Treasury bond yields from a 10-week high also exerts downside pressure on the GBP/JPY price amid a sluggish session.

Moving on, the GBP/JPY traders should pay attention to the risk catalysts, mainly to the headlines about the US debt ceiling deal passage and the central bank clues.

Technical analysis

Although overbought RSI hints at the further pullback in GBP/JPY price, buyers remain hopeful unless the quote stays beyond a seven-month-old previous resistance line, around 172.50 by the press time.