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  • GBP/JPY remains on the back foot near the lowest since June 01.
  • Risk barometers dwindle despite the recent pullback in US bonds yields, stock futures.
  • Japan’s Industrial Production, British data dump for April will be the key.

GBP/JPY stands on a slippery ground near 133.85, down 0.63% on a day, amid the initial hour of Tokyo open on Friday. The pair drops for a fifth consecutive day as markets remain concerned about the risks.

The US Federal Reserve-led economic fears join the odds of the coronavirus (COVID-19) resurgence off-late. Also weighing on the pair could be the Brexit pessimism following the recently flashed downbeat signals by the European Union (EU) and the British negotiators.

The Fed dashed hopes of V-shaped recovery whereas the latest virus figures from some of the US states suggest the pandemic isn’t over yet. Further, the UK’s Chief Brexit diplomat Michel Gove reiterates the deadlock in the trade deal talk while strongly backing no extension of the departure date, i.e. December 31, 2020. Even so, the Financial Times (FT) suggests that the UK abandons plan to introduce full border checks with the EU on January 1. Elsewhere, clinical trials over the probable COVID-19 drugs in China recently offered promising results.

Amid all these catalysts, the US 10-year Treasury yields recovery two basis points from the monthly low flashed the previous day to 0.672%. On the other hand, Japan’s Nikkei drops 2.53% to 21,900 by the press time.

Given the mixed plays of risks weighing on the quote, traders may wait for immediate data release. In doing so, Japan’s April month Industrial Production, expected to remain unchanged at -14.4%, can offer nearby direction ahead of the UK’s data dump. British Industrial Production for April and Gross Domestic Product (GDP) becomes the key to watch. Forecasts suggest the former to drop -18.4% versus -5.8% with the later reading likely following the suit with -15.8% against -4.6 % previous readouts.

Read: UK GDP Preview: A 20% plunge could serve as a third blow to sterling, three scenarios

Technical analysis

The pair’s sustained trading below 100-day SMA seems to drag it towards the early-May top surrounding 133.20. However, an ascending trend line from March 18, at 131.60 could challenge the bears afterward. Alternatively, the pair’s upside past-100-day SMA level of 135.67 will have to cross 200-day SMA, at 137.63 now, before challenging the monthly top near 139.75.

 

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