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  • Change in risk sentiment triggered the latest short-covering.
  • Weakness can’t be denied amid overall political risk.

GBP/JPY buyers are cashing in the latest drop to mid-January lows during early Friday when the quote ticks near 138.90.

Prices plunged on Thursday as escalating tension at the US-China trade front and downbeat economic data increased safe-haven demand of the Japanese Yen (JPY).

Adding to the downside could be political uncertainty at the UK wherein Theresa May is finding it hard to remain as the Prime Minister amid growing revolt over her Brexit proposal.

Media reports are on the rounds spreading speculations of her resignation or the departure timetable as soon as today.

The 10-year US treasury yield, considered to be the market sentiment gauge, dropped to 2.30%, the lowest since late-2017 on Thursday.

Risk tone retraced in the Asian session with the JPY and treasuries stepping back while the British Pound (GBP) also extends its latest uptick on expectations of breaking Brexit deadlock after PM May leaves.

Looking forward, Japan’s all industry activity index and the UK retail sales will be in the spotlight. The forecast suggests Japanese activity index marks -0.1% figure versus -0.2% while the British retail sales could decline to -0.3% and +4.6% versus 1.1% and +6.7% respective previous growth figures on MoM and YoY basis.

Technical Analysis

The quote needs to cross 139.50 in order to aim for 140.00 and then run up towards three-week-old trend-line resistance at 140.80.

If the pair fails to hold the latest strength, 138.30 and mid-January low near 137.35 could be on sellers’ list.