• GBP/JPY advanced slightly on Thursday near the 148.50 mark.
• Technicals still point to overbought conditions, suggesting that a downward correction may be on the horizon.
• The Sterling traded strongly against its major rivals.

The GBP/JPY advanced slightly on Thursday's session, mainly benefiting from weak Q1 Gross Domestic Product (GDP) data from Japan. On the other hand, the Sterling traded strongly across the board, seeing gains against the USD, CHF, EUR and AUD. Furthermore, the JPY’s downside potential is limited as the Yen gets traction on the prospects of the Bank of Japan (BoJ) interventions and cautions market mood.

Cautious markets provide support to the Yen, eyes on BoE’s decision

The Japanese Yen is finding support from the recent expectations of further interventions by the BoJ to bolster the domestic currency. Additionally, the JPY's safe-haven appeal is benefiting from a cautious market sentiment due to concerns about a global economic slowdown, particularly in China.

On the other hand, market expectations are currently pointing towards an anticipated interest rate hike by the Bank of England (BoE) from 4.5% to 4.75% on June 22. Moreover, markets discount a roughly 60% probability that rates will reach a peak of 5.5% later in the year. In that sense, the recent surge in UK core inflation figures to a 31-year high has fueled expectations of a more hawkish stance from the Bank of England, providing traction to the Sterling.

GBP/JPY levels to watch

Technically speaking, the GBP/JPY  holds a neutral to bullish outlook for the short term while the bulls seemed to have taken a breather. The Relative Strength Index (RSI) currently stands near 67.00, just below the overbought area after getting rejected by 70.00 since the end of May suggesting that if the bulls fail to break it, a downward correction may come into play. 

Upcoming resistance for GBP/JPY is seen at the zone of 174.70 before uncharted territory. On the other hand, the next support levels to watch are the 174.00 zone, followed by the psychological mark at 173.00 and the 172 area.

GBP/JPY daily chart