• GBP/JPY struggled to capitalize on its modest intraday uptick to the 156.20 area.
• Fresh Brexit-related tensions acted as a headwind for sterling and capped gains.
• A softer risk tone underpinned the safe-haven JPY and kept bulls on the defensive.

The GBP/JPY cross seesawed between tepid gains/minor losses heading into the European session and was last seen trading in the neutral territory, just below the 156.00 mark.

Having found some support ahead of mid-155.00s on Friday, the GBP/JPY cross gained some positive traction during the early part of trading on the first day of a new week. The uptick, however, lacked bullish conviction and lost steam near the 156.20 region amid a generally softer risk tone, which tends to benefit the safe-haven Japanese yen. Apart from this, fresh tensions over the Northern Ireland protocol of the Brexit agreement undermined the British pound and further contribute to capping the upside for the cross.

In the latest development, Northern Ireland's Agriculture Minister ordered a halt from Wednesday midnight to all post-Brexit checks on agri-food goods coming into the region from the rest of the UK. This triggered a fresh political crisis in the region and led to the resignation of Northern Ireland’s first minister Paul Givan on Thursday in protest against the post-Brexit trade rules. Adding to this, a German official said on Thursday that Britain should respect post-Brexit trade rules or else face consequences.

Despite the negative factors, the downside for the GBP/JPY cross remains cushioned amid a more hawkish Bank of England (BoE) decision last week. It is worth recalling that the BoE raised interest rates by 25 bps, as was widely expected, and four out of nine MPC members voted for an aggressive 50 bps hike in borrowing costs. This should continue to act as a tailwind for sterling and warrants some caution before confirming that the recent strong bounce from sub-153.00 levels, or the very important 200-day SMA has run its course.

Technical levels to watch