GBP/JPY: Mixed amid UK’s political upheaval, upbeat trade sentiment

• GBP/JPY extends the latest recovery gains.
• Uncertainty surrounding UK’s political future, due to PM Johnson’s health issues, weigh on the upside prospects.
• US President Trump showed readiness for another round of direct payments to Americans.
• Japan’s second-tier economics flashed mixed results, virus updates in focus.

Despite bouncing off 132.94 to the intraday high of 133.66, GBP/JPY registers no major gains on the daily basis during Tuesday’s Asian session. The pair earlier dropped after concerns over the health of the UK PM grabbed market attention. However, upbeat statements from US President Donald Trump and mixed data from Japan offered immediate direction to the pair.

Japan’s Overall Household Spending for February recovered from -3.9% expected and prior readings to -0.3% while Labour Cash Earnings weakened from 2.1% forecast to 1.0%. Further, Japanese Foreign Reserves for March rose from $1,359B to $1,366.2B.

While UK PM Boris Johnson is receiving oxygen in the Intensive Care Unit (ICU), he deputized the Foreign Minister Dominic Raab to lead the nation through the coronavirus crisis.

On the other hand, US President Trump showed readiness to take a step forward and announce another aid payment to every American if needed to combat the virus. The Republican leader earlier cited fears of a virus outbreak in the upcoming one and a half week while also showing resentment from Indian actions asking for help from China. Also adding to the optimism could be comments from Japan’s PM Shinzo Abe who provided fresh hints for the much awaited relief package.

Market’s risk-tone seems to take clues from US President Trump’s latest comments and hence the US 10-year treasury yields extend the previous run-up to 0.687% by the press time. Also portraying the risk-one sentiment are the US stock futures and Japan’s NIKKEI.

Investors may now await further virus updates and the next move of the UK government, under the new leader, for fresh direction.

Technical analysis

10-day EMA near 133.00 and the monthly low surrounding 132.50 are likely immediate supports that limit the pair’s near-term declines. On the contrary, buyers will look for a sustained break of the one-week-old falling trend line, currently around 133.60, for further direction.