- GBP/JPY snaps two-day winning streak, declines 0.30% so far during Asia.
- Fears of US-China trade war, the halving of UK factory output supersede negative catalysts from Japan.
- UK Manufacturing PMI, virus updates and trade headlines could keep the pair traders busy.
While stepping back from the multi-day top, GBP/JPY declines to 134.50, down 0.30% on a day, amid the Asian session on Friday.
US President Donald Trump’s aggression to use tariffs on China as well as fears of halving the UK factory output seems to have joined the broad virus-led risk aversion wave recently.
In doing so, the pair seems to have ignored downbeat forecasts for Japanese GDP and soft statistics from the Asian nation, not to forget expectations that the Japanese PM Shizo Abe will extend national emergency.
Having earlier said that the US trade deal with China has been “upset very badly” by the coronavirus, US President Trump recently threatened to use tariffs and escalated the risk-off sentiment.
Reuters came out with the news, while relying on the trade body Make the UK, which says that British factory output risks falling by more than half during the current quarter after 80% of manufacturers reported a collapse in orders due to the coronavirus.
On the other hand, Japan’s Tokyo Consumer Price Index and Jibun Bank Manufacturing PMI registered downbeat figures whereas the NIKKEI survey suggested the Asian nation’s Q2 GDP 2020 could slump to World War II levels. Additionally, Japan’s public broadcaster NHK conveyed the news that the Japanese PM Shizo Abe will extend its state of emergency for containing the novel coronavirus as early as Monday.
Also read: BoJ March meeting minutes: Several board members said consumer, household sentiment could sour rapidly
Amid all these plays, US stock futures flash more than 1.0% loss whereas Japan’s NIKKEI drop 1.80% to 19,810 by the press time.
The pair traders will keep eyes on the trade/virus updates for near-term direction while UK Manufacturing PMI, the first revision to the preliminary figures of 32.9, can offer intermediate direction.
Technical analysis
Failures to cross 50-day EMA, currently around 135.00, on a daily closing basis direct sellers towards 133.80/75 region comprising 21-day SMA. On the contrary, an upside break above 135.00 will need to cross April month high surrounding 135.75 to aim for a 100-day EMA level of 136.65.
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