GBP/JPY eases from two-week tops, still well bid around mid-152.00s

• A combination of factors assisted GBP/JPY to regain positive traction on Wednesday.
• A declining trend in Delta variant infections in the UK underpinned the British pound.
• The worsening COVID-19 situation in Japan weighed on the JPY amid signs of stability.

The GBP/JPY cross maintained its bid tone through the first half of the European session and shot to near two-week tops, just above mid-152.00s in the last hour.

Following the previous day's modest pullback, the GBP/JPY cross caught some fresh bids on Wednesday and built on its recent strong rebound from the 148.45 region, or the lowest level since March. In the absence of any negative Brexit-related headlines, the British pound remained well supported by the declining trend in Delta variant infections.

In fact, new COVID-19 cases in Britain declined for the seventh consecutive day on Tuesday. Adding to this, UK’s top epidemiologist Neil Ferguson has said that the end of the pandemic in Britain could be just months away. This, in turn, was seen as a key factor that acted as a tailwind for the sterling and continued pushing the GBP/JPY cross higher.

On the other hand, the worsening COVID-19 situation in Japan, along with signs of stability in the equity markets, undermined the safe-haven Japanese yen and provided an additional boost to the GBP/JPY cross. In the latest developments, Japan reportedly mulls a state of emergency for Tokyo neighbouring prefectures amid record new cases on Wednesday.

The fundamental backdrop favours bullish traders amid absent relevant market moving economic releases. That said, it will still be prudent to wait for some strong follow-through buying before positioning for any further appreciating move towards the 154.00 mark. The momentum could eventually lift the GBP/JPY cross further towards the key 155.00 psychological mark.

Technical levels to watch