GBP/JPY slips below 192.00 to hit a daily low, downside potential looks limited

• GBP/JPY is struggling to parlay its modest intraday gains beyond the 200-day SMA.
• GBP is pressured by modest USD strength and acts as a headwind for the cross.
• BoJ rate hike uncertainty keeps JPY bulls on the defensive and provides support.

The GBP/JPY cross is attracting some intraday sellers on Tuesday and retreating more than 100 pips from the daily high around the 159.35 region amid some selling around the British pound (GBP). Spot prices are falling to a new daily low during the early European session and are currently trading just below the 192.00 mark, down nearly 0.20% on the day.

The US Dollar (USD) is gaining further traction following Federal Reserve (Fed) Chairman Jerome Powell’s overnight rant and is proving to be a key factor weighing on the British Pound (GBP). Apart from this, GBP’s intraday decline has no obvious fundamental catalyst and is likely to remain limited amid expectations that the Bank of England’s (BoE) rate cut cycle is likely to be slower than in the US and Eurozone. This, along with the tone provided around the Japanese yen (JPY), should help limit downside for the GBP/JPY cross.

Japan’s incoming Prime Minister (PM) Shigeru Ishiba expressed a cautious view on interest rate hikes by the Bank of Japan (BoJ) and said on Monday that he plans to call a general election on October 27. This, along with optimism about a stimulus. bonanza from China, undermines the safe JPY and acts as a tailwind for the GBP/JPY cross. Meanwhile, spot prices moved little after the release of the final UK manufacturing PMI, which was revised up to 45.0 for September, compared to the flash print of 44.8 and the previous month’s reading.

However, the fundamental background mentioned above makes it prudent to wait for a strong sell-off before positioning for any significant downside for the GBP/JPY cross. From a technical perspective, the recent repeated failures to find support above the all-important 200-day simple moving average (SMA) and the formation of a “Death Cross” on the daily chart – the 50-day SMA crossing below the 200-day. SMA – worth caution for bullish aggressive traders.