- Weaker UK macro data prompts some fresh selling around the British Pound.
- UK political and Brexit uncertainties add to the prevailing bearish pressure.
- Risk-on mood dents the JPY’s safe-haven status and helped limit the downside.
The GBP/JPY cross failed to capitalize on the weekly bullish gap opening to over one-week tops and is currently placed at the lower end of its daily trading range, around mid-137.00s.
The cross continued with its struggle to sustain or build on its momentum beyond the 138.00 handle and came under some renewed selling pressure following the disappointing release of UK macro data, showing that the UK economy contracted for the second consecutive month in April.
This coupled with the fact that all the leading candidates for the next British PM – Boris Johnson, Andrea Leadsom, Jeremy Hunt and Dominic Raab, pledged to leave the EU on 31 October even without a deal further dented the already weaker sentiment surrounding the British Pound.
Meanwhile, the prevailing risk-on mood, as depicted by a positive trading sentiment around equity markets, was seen weighing on the Japanese Yen’s relative safe-haven status and turned out to be the only factor that helped limit further downside, at least for the time being.
Having said that, a follow-through selling has the potential to drag the cross back towards the 137.00 round figure mark, which if broken should pave the way for the resumption of the prior bearish trend and set the stage for a retest of multi-month lows, around the 136.60-55 region.
Technical levels to watch
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