GBP/JPY pushed back below 50-day MA as UK political turmoil returns

• Sterling offered in Asia as Brexit negotiator DAvid Davis’ resignation has created political uncertainty in the UK.  
• GBP/JPY fell back below 50-day moving average (MA) in Asia.  

The GBP is being offered in Asia as Brexit negotiator David Davis’ resignation pushed the UK government into crisis.  

As of writing, the pair is trading at the session low of 146.60 and the 50-day MA is located at 146.82.  

The currency pair had gapped higher at 147.07 in early Asia on reports that British Prime Minister May has reached deal with cabinet on Brexit strategy. However, the optimism evaporated after the news of Brexit Secretary David Davis’ resignation hit the wires.  

Davis took the drastic step reportedly due to a major row with Theresa May over her plans for post-Brexit relations with the EU. Also, two other ministers almost immediately resigned after Davis.  

It is now feared that departure of Davis and two other ministers may embolden other senior figures to quit. Further, May’s incapability of holding her team together leaves her in at best a weak negotiating position. Consequently, the British Pound may remain on the defensive.  

That said, the technicals are biased toward the bulls. For instance, the pair cleared a key falling trendline (drawn from April 18 high and April 26 high) last week and the 14-day relative strength index (RSI) has turned bullish (above 50.00).  

GBP/JPY Technical Levels

Resistance: 147.07 (session high), 148.11 (June 7 high), 148.27 (100-day MA).  

Support: 146.35 (5-day MA), 145.81 (10-day MA), 145.00 (psychological level).