- GBP/JPY fails to hold recent recovery as geopolitical tension from North Korea strengthened safe-havens.
- Speculations surrounding BOJ easing and no-deal Brexit keep playing its role.
- A lack of economic data/events highlights political/trade headlines to follow.
Given the recent increase in safe-haven demand, coupled with a slew of appointment notices from the UK PM’s office, the GBP/JPY pair declines below 135.00 during early Thursday.
North Korea test-fired two unidentified projectiles during early morning in Asia and triggered the safe-haven buying as investors fear it as the start of fresh US-North Korea tension. The Asian nation previously conducted such a test in May after the failed talks with the US.
Contrary to the search of risk-free buying, speculations concerning the Bank of Japan’s (BOJ) additional monetary easing off-late weigh on the Japanese Yen (JPY). Having won a clear majority in the upper house election, the Prime Minister (PM) Shinzo Abe is set to announce tax hike in October, which in turn will push the Japanese central bank towards further easy money policy.
On the other hand, Boris Johnson and the company is actively announcing the team members to govern the UK and counter the Brexit risk, with clear intention to leave the EU ahead of October 31 deadline. While Sajid Javid is appointed as the Finance Minister, Jacob Rees-Mogg will become the UK leader of the House of Commons.
Elsewhere, the US-China trade developments and lack of additional negative news from Iran are playing a positive role for the pair.
Investors may now focus on the political/trade news amid lack of data/events at home. However, monthly releases of Japan’s Corporate Service Price (YoY) for June and the UK’s CBI Distributive Trade Survey (MoM) for July will offer intermediate trading opportunities.
Technical Analysis
135.37/45 area, comprising June low and 21-day exponential moving average (EMA), becomes the key resistance for the pair, a break of which can trigger fresh upside towards early-month high surrounding 136.30. Until then, 134.20 and 133.85 can keep being on the sellers’ radar.
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