• GBP/JPY picks up bids to challenge six-week-old resistance.
• Cautious optimism underpins recovery moves amid sluggish session.
• BOE hawks, indecision surrounding BOJ’s next move favor pair buyers.

GBP/JPY prints 0.30% intraday gains as it pokes a multi-day-old resistance line surrounding $167.60 heading into Tuesday’s European session.

In doing so, the cross-currency pair cheers the market’s risk-on mood, as well as sluggish US Treasury bond yields and the indecision over the Bank of Japan’s (BOJ) next moves.

Reuters quotes Takeo Hoshi, an academic with close ties to incumbent central bank policymakers, to mention that the Bank of Japan (BoJ) could do away with its 10-year Japanese government bond (JGB) yield cap in 2023 on increasing odds that inflation and wages will exceed expectations.

Earlier in the day, BOJ’s Kuroda mentioned that Japan has not achieved stable 2% inflation accompanied by wage rises. However, the policymaker also stated, “Once 2% inflation target is consistently met, will consider exiting ultra-loose policy.”

Hence, the BOJ policymaker’s hesitance in accepting tighter monetary policies favors the GBP/JPY buyers. The same could be linked to the recently sluggish US Treasury yields and mildly bid S&P 500 Futures.

It’s worth noting that the British Retail Consortium’s (BRC) Like-For-Like Retail Sales jumped 4.1% YoY in November versus 1.2% prior. Even so, Reuters said, “British consumer spending ticked up last month at a rate that greatly lagged behind inflation, according to surveys on Tuesday that underscored the pressure on household budgets ahead of the Christmas holidays.” On the contrary, the final readings of the UK’s November month S&P Global/CIPS Composite PMI eased to 48.2 versus 48.3 initial forecasts whereas the S&P Global/CIPS Services PMI confirmed the 48.8 flash estimates.

Amid these plays, US stock futures print mild gains and the Treasury bond yields also reverse the early Asian session declines.

Moving on, headlines surrounding the BOJ’s next move and the BOE’s optimism could entertain the GBP/JPY traders amid a light calendar.

Technical analysis

GBP/JPY justifies the last Friday’s rebound from the 100-DMA, around 164.40 by the press time, to lure the bulls. Even so, a downward-sloping resistance line from October 10, close to 167.60 at the latest, restricts the short-term upside of the pair.

That said, steady RSI (14) and sluggish MACD signals, mostly in the red, keep the pair sellers hopeful.

GBP/JPY: Daily chart

Trend: Further weakness expected