- No-deal Brexit fears continue to dent sentiment surrounding the British Pound.
- A turnaround in risk sentiment undermines JPY and helped ease the pressure.
- The second round of Tory leadership contest remains in the spotlight on Tuesday.
The GBP/JPY cross now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading band just above mid-135.00s, or 5-1/2 month lows.
The cross extended last week’s rejection slide from the 138.25-35 supply zone and remained under some heavy selling pressure for the fifth consecutive session on Tuesday – also marking its sixth day of the negative move in the previous seven.
Given that hardline Brexiteer Boris Johnson is still seen as a leading candidate to be Britain’s next Prime Minister, sentiment surrounding the British Pound remains fragile amid rising fears of a no-deal Brexit and kept exerting some pressure on the cross.
Adding to this reports that the UK Chancellor of the Exchequer (Finance Minister) Hammond is prepared to resign due to his disagreement over the Prime Minster May’s spending plans further dented the already weaker sentiment.
Meanwhile, a sudden turnaround in the risk sentiment, as depicted by a solid bounce in the European equity market following Draghi’s dovish comments on Tuesday, undermined the Japanese Yen’s safe-haven demand and helped limit further losses.
Investors also seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of the second round of voting for the Tory leadership and the BoE Governor Mark Carney’s scheduled speech at the ECB Forum on Central Banking in Sintra later this Tuesday.
Technical levels to watch
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