GBP/JPY retraces to 135.50, awaits BOE for fresh impetus

The GBP/JPY cross once again faced rejection above 136.00 handle and has now erased all of its tepid gains to currently trade around mid-135.00s.

The British Pound gained some traction after UK monthly retail sales came-in slightly better-than-expected, posting a contraction of 0.2% versus expectations f a 0.4% drop. The momentum, however, was short-lived and the cross failed to build on to its momentum as investors continue to reposition themselves ahead of BOE monetary policy decision. The central bank is expected to leave its monetary policy unchanged, with official bank rate at a record low of 0.25% and the asset purchase facility at £435 billion.

Meanwhile, lack of clarity over BOJ's next monetary policy action is also contributing to uncertain environment and has led to a range-bound trading action around the GBP/JPY cross. 

However, today's BOE decision and accompanying minutes would help investors to evaluate possibilities of further monetary easing and would eventually provide short-term momentum play for traders.

Technical levels to watch

On the downside, 135.00 psychological mark remains immediate support to defend, which if broken is likely to drag the cross immediately towards weekly low support near 134.50-45 region before the pair eventually drops to towards its next major support near 133.50 area.

Meanwhile on the upside, 136.00 round figure mark might continue to attract fresh selling pressure and hence, remains immediate strong hurdle, which if cleared is likely to trigger a short-covering rally that could boost the pair towards its next major resistance near 137.00 handle.