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  • GBP/JPY maintains downside break of 21-day SMA.
  • The UK’s political/Brexit pessimism joins global risk headlines.
  • Japan’s Retail Sales crossed upbeat forecast but Industrial Production declined in August.

With the British headlines following the global political pessimism, coupled with mixed data from Japan, the GBP/JPY pair holds on to its weakness below 21-day SMA while declining to 132.70 during Monday’s Asian session.

The political/Brexit pessimism at the United Kingdom (UK) recently got an additional boost as the Prime Minister (PM) Boris Johnson signals readiness to avoid law forcing him to delay Brexit. However, the UK Telegraph indicated that the opposition Labour party backed remain alliance is under the process of forming a political plot that will push the Tory leader to obey the rule. Adding burden on the political watchers is The Guardian’s news report stating that the case involving possible conflict of interest when PM Johnson was mayor of London is given to police for further inquiry.

On the other hand, Japan’s August month retail sales and industrial production data flashed mixed signals. The retail sales grew more than 0.0% and 0.9% on MoM and YoY basis to 4.8% and 2.0% respectively. However, industrial production slipped below -1.8% and -0.5% to -4.7% and -1.2% in the same order on the yearly and the monthly basis. Further, the Bank of Japan’s (BOJ) September month summary of opinions suggested that most of the policymakers support the view that the BOJ must maintain current powerful monetary easing.

Other than UK/Japan catalysts, headlines concerning the trade relations between the United States (US) and China, coupled with the geopolitical tussles between the US and the Middle East, have also been influencing the GBP/JPY pair.

Chinese diplomat Wang Yi’s latest response to the speculations that the US is considering measures to curb the portfolio flow to China signal that the dragon nation is more concerned about its trade war with China that the otherwise. Elsewhere, Saudi Arabia’s Crown Prince Mohammad bin Salman’s recent interview with the US TV shows that the Middle East ruler is all in support of the US but wants to avoid a war with Iran.

With this, the global risk sentiment seems to have improved with the US 10-year treasury yields recovering to 1.682% by the press time.

Investors will now concentrate on the UK Gross Domestic Product (GDP) and trade/political headlines for fresh impulse.

Technical Analysis

Sustained trading below the 21-day simple moving average (SMA) signals brighter chances of pair’s gradual declines to 130.80/70 area, including August 22 high and September 09 low. However, an upside break of 21-day SMA level of 133.05 can challenge July 18 low near 133.85 prior to targeting 100-day SMA, at 134.15 now.