- GBP/JPY added to the overnight losses and witnessed heavy selling for the second straight day.
- Brexit jitters, COVID-19 woes acted as a headwind for the sterling and exerted some pressure.
- Sustained weakness below mid-154.00s might have already set the stage for additional losses.
The offered tone surrounding the British pound dragged the GBP/JPY cross to two-week lows, around the 154.15-10 region during the first half of the European session.
The cross extended the previous day’s sharp pullback from the 155.30 region, or weekly tops and witnessed some follow-through selling for the second consecutive session on Thursday. The downfall was sponsored by the emergence of some heavy selling around the sterling and pushed the GBP/JPY cross further away from multi-year tops, around the 156.00 mark touched in May.
The EU-UK collision over Norther Ireland protocol, along with coronavirus jitters acted as a headwind for the GBP. The European Union warned of swift and firm action if the UK fails to implement its post-Brexit obligations. There are also speculations that the UK may delay plans to end restrictions fully on June 21 in light of the spread of the so-called Delta variant.
The combination of factors overshadowed the overnight comments by the Bank of England Chief Economist, Andy Haldane, saying that the central bank might need to turn off the tap of its huge monetary stimulus. Adding to this, the prevalent cautious mood benefitted the safe-haven Japanese yen and further contributed to the ongoing decline to the lowest level since May 27.
With the latest led down, the GBP/JPY cross now seems to have confirmed a bearish break below horizontal support near mid-154.00. A subsequent fall below the 154.00 round figure will reaffirm the negative bias in the absence of any major market-moving economic releases. This, in turn, will set the stage for an extension of the near-term depreciating move.
Technical levels to watch
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