GBP/JPY recovers sharply to 133.00 neighborhood after BOJ announcement

Following BOJ announcement, the Japanese Yen turned volatile with the GBP/JPY cross dropping below 131.00 handle to a fresh 4-week low before quickly recovering all of its losses and turn positive. 

Currently trading around 133.00 handle, the cross initially came under selling pressure after BOJ left its key benchmark rate unchanged at -0.1% and monetary policy base unchanged at 80 trillion yen. The announcement fell short of street expectations anticipating the central bank to take interest rates farther into negative territory and (or) step-up the asset purchases.

The cross, however, managed to recover sharply as BOJ showed commitment to achieve 2% inflation target as soon as possible and was ready to cut short term policy rate, target level of long term rates in future easing.

Next in focus would be the BOJ press conference, where a dovish commentary would add to the selling pressure around the Japanese currency and assist the cross to extend its recovery momentum. 

Technical levels to watch

A follow through buying interest above 133.00 handle is likely to accelerate the recovery momentum immediately towards 133.70-80 resistance. On the downside, 132.00 handle now becomes immediate support below which the cross is likely to fall back to 131.50 and turn vulnerable to test 130.75 support area.