The GBP/JPY cross has been under pressure for a third consecutive day, falling in five of the last six trading sessions. On Tuesday, the pair dipped to the round level of 207.00, renewing the year-to-date low first set in February. However, during the Asian session today, spot quotes retraced some losses and sit near 208.50, still down about 0.25% on the day.

The Japanese yen continues to show relative strength as traders cover shorts amid rising expectations of a Bank of Japan-initiated rate increase. These expectations were supported by recent data showing real wages in Japan rising for the seventh consecutive month and economic growth beating prior expectations. That creates a case for a BOJ rate increase at the meeting on September 17–18.

Some analysts do not rule out a material rate hike aimed at curbing rising inflation expectations, controlling long-term bond yields and supporting the yen. Moreover, market participants are already pricing in the chance of another hike before the new year in December, which further underpins the East Asian currency. Additional pressure on the pound comes from the modest strength of the US dollar, which has contributed to the continued decline in GBP/JPY.

The pound's fall is nevertheless constrained by an optimistic growth program and a push for fiscal discipline advocated by UK Chancellor John Healey. Also notable is that yen bulls paused after a strong weekly advance, which produced a moderate intraday recovery in GBP/JPY. Nevertheless, under current conditions, fundamentals clearly favor the bears, suggesting any further upside attempts will likely be met with selling.

Technically, the recovery met resistance at 208.50. This rebound is accompanied by a corrective tone signaled by oversold oscillators. The next resistance levels are the round numbers 209.00 and 209.50, where the pair could see selling again. Only a break above the round 210.00 level would give the pair a chance to tread sideways for a time and gather strength for a more sustained recovery. Support comes from the round 207.00 level; if that level fails to hold, prices should accelerate down to 205.50.

Below is the percent change of the yen against major currencies over the past seven days. The yen's largest gain was versus the New Zealand dollar.