GBP/JPY slips to 3-week low near mid-187.00s amid notable JPY strength

• GBP/JPY falls to a new multi-week low amid sustained buying around the JPY.
• Hawkish BOJ expectations, along with a softer risk tone, support the safe JPY.
• A decisive break below the 188.00 level supports further downside prospects.

The GBP/JPY cross is attracting fresh sellers during the Asian session on Friday and is falling further below the 188.00 level, hitting a three-and-a-half-week low in the last hour.

This marks the third day of a negative move in the last four and is sponsored by some further buying around the Japanese yen (JPY), which continues to be supported by dovish expectations of the Bank of Japan (BOJ). In fact, BOJ Governor Kazuo Ueda reiterated earlier this week that the central bank will continue to raise interest rates if the economy and prices perform as expected.

Adding to this, BoJ Governing Council member Hajime Takata said on Thursday that we need to adjust monetary conditions by another notch if we can confirm that firms will continue to raise capital spending, wages and prices. Moreover, data released on Thursday showed that real wages in Japan unexpectedly rose for a second straight month in July, keeping the BOJ on track for another potential rate hike in 2024.

Meanwhile, a mixed bag of employment data released from the United States (US) this week sparked concerns about the health of the economy. This, along with lingering geopolitical tensions, is tempering investor appetite for riskier assets, which is seen as another factor supporting the safe-haven JPY and putting further downward pressure on the GBP/JPY cross amid a lack of any buying around the pound British (GBP).

With the last leg down, spot prices confirm an intraday breakdown through the 189.00 horizontal support and a subsequent slide below the 188.00 mark favors bear traders. Furthermore, the oscillators on the daily chart remain in negative territory and are still far from being in the oversold zone. This suggests that the path of least resistance for the GBP/JPY cross is to the downside and supports the outlook for further losses.