- Persistent fears of no-deal Brexit continues to weigh on the British Pound.
- Pessimism over the global economic outlook benefits JPY’s safe-haven status.
- Highly oversold conditions might help limit deeper losses, at least for now.
The GBP/JPY cross came under some renewed selling pressure on Wednesday and dropped back to the 128.00 neighbourhood, multi-year lows set in the previous session.
The cross failed to capitalize on the previous session’s intraday recovery move, with a combination of negative forces exerting some fresh downward pressure on Wednesday – also marking its fourth day of a downfall in the previous five. The British Pound remained depressed amid persistent uncertainty surrounding Britain’s exit from the European Union by the new extended deadline – Oct. 31.
Meanwhile, the recent escalation in the US-China trade disputes triggered a fresh leg of a free-fall across global bond yields and clearly indicated that investors are growing increasingly pessimistic about the outlook for the world economy. This eventually benefitted the Japanese Yen’s relative safe-haven status and further collaborated to the pair’s ongoing slide back closer to multi-year lows.
However, extremely oversold conditions might hold back investors from placing any aggressive bearish bets and help limit deeper losses, at least for the time being, albeit any attempted recovery move might still be seen as an opportunity to initiate some fresh selling positions. Hence, a follow-through weakness, led by some technical selling below the 128.00 handle, remains a distinct possibility.
Technical levels to watch
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