GBP/JPY Review: BOE's dovish hike has shifted risk in favor of a drop below 145.00

• BOE's dovish 25 basis point rate hike pushed GBP lower across the board on Thursday. 
• GBP/JPY risks falling below 145.00, courtesy of dovish BOE, escalating trade tensions and Brexit uncertainty. 

The GBP/JPY pair remains on the back foot, courtesy of BOE's dovish rate hike and risks deeper drop below 145.00 on Brexit uncertainty and rising trade tensions.

At press time, the currency pair is trading at 145.30, having clocked a session high of 145.50, largely due to oversold conditions shown by the intraday relative strength index.

The Bank of England (BOE) hiked rates by 25 basis points yesterday but said very low rates are the new normal. The policy statement also indicated the central bank is at the mercy of the Brexit fog, meaning it may reverse interest rates if the Brexit negotiations go awry.

Consequently, the GBP took a beating despite the rate hike and may drop even further on escalating US-China trade tensions. Further, the CNY slide may hurt both JPY and GBP, however, the Japanese currency's safe-haven status might ensure the currency outperforms GBP. As a result, GBP/JPY could soon find acceptance below 145.00.

The technical chart indicates a close below 145.00 would open the doors to a deeper drop towards the May 29 low of 143.19.

Daily chart

Resistance: 145.46 (July 24 low), 146.02 (200-hour moving average), 146.14 (50-hour moving average)

Support: 145.00 (psychological support), 144.59 (lower Bollinger Band), 143.77 (June 28 low)