- Higher risk appetite in the NA session weighs on the safer JPY.
- Brexit uncertainty is likely to keep the pair’s upside capped.
The GBP/JPY pair dropped to its lowest level in nearly a month at 143.75 earlier today as the GBP struggled to find demand amid concerns over the lack of progress in Brexit negotiations. However, with the risk-on mood dictating the price action in the FX markets in the second half of the day, the pair retraced its losses and was virtually unchanged near 144.50 as of writing.
Earlier today, Irish Prime Minister Varadkar stated that they needed to start making preparations for the unlikely scenario of ‘Britain crashing out of the EU without a deal.’ On the other hand, British Prime Minister Theresa May said that both sides wanted a faster pace in Brexit negotiations.
Meanwhile, both the rising T-bond yields and the modest gains seen in the major equity indexes in the United States pointed to an improved market sentiment and made it difficult for the JPY to find demand. The Dow Jones Industrial Average and the S&P 500 closed the day 0.4% and 0.5% higher respectively.
On Friday, Tokyo core-CPI data from Japan will be released ahead of the Q1 GDP growth figures from the UK. Markets expect the annual real-GDP growth to remain steady at 1.2% in the first quarter of the year. A weak reading could weigh on the already vulnerable GBP and vice versa.
Technical levels to consider
The pair could face the first technical support at 143.75 (Jun. 28 low) ahead of 143.20 (May. 29 low) and 142.70 (Sep. 11, 2017, low). On the upside, resistances align at 144.65 (Jun. 28 high), 145 (psychological level) and 145.65 (Jun. 27 high).
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