GBP/JPY plummets to 3-week lows, fast approaching 133.00 mark

• The British pound gained some intraday traction following the BoE announcement.
• The uptick was quickly sold into and has now dragged GBP/JPY to three-week lows.
• The risk-off mood benefitted the safe-haven JPY and exerted some heavy pressure.

The GBP/JPY cross quickly reversed the post-BoE spike and dived to near three-week lows, below mid-133.00s in the last hour.

As was widely expected, the Bank of England (BoE) decided to leave the benchmark interest rate unchanged at 0.10% and increased the size of its quantitative easing program by £100 billion. The fact that there was no mention of negative rates in discussions provided a goodish intraday lift to the British pound.

The uptick, however, lacked any strong follow-through, rather was quickly sold into. A further deterioration in the global risk sentiment – as depicted by a fresh leg down in the equity market benefitted the safe-haven Japanese yen and was seen as a key factor that prompted some fresh selling around the GBP/JPY cross.

The cross has now retreated around 300 pips from weekly tops set on Tuesday and now seems vulnerable to extend its recent sharp pullback from over three-month tops set earlier this month. Hence, some follow-through weakness towards the 133.00 mark, en-route the next major support near mid-132.00s, now looks a distinct possibility.

Technical levels to watch