- GBP/JPY comes under some renewed selling pressure on Wednesday.
- Persistent fears of a no-deal Brexit continues to weigh on the pound.
- The JPY benefitted from the flight to safety and added to the selling bias.
The GBP/JPY cross weakened back below the 143.00 mark during the early European session on Wednesday and dropped to the lower end of its weekly trading range.
Following the previous session’s modest gains and a subsequent uptick earlier this Wednesday, the cross came under some renewed selling pressure and was being weighed down by a combination of factors.
GBP/JPY weighed down by a combination of factors
The British pound remained on the defensive amid persistent fears of a no-deal Brexit, which were further fueled by the UK’s diverging stance over the future trade relationship with the European Union (EU).
It is worth recalling that the EU on Tuesday published its mandate for the post-Brexit trade talks and turned down prospects for the UK Prime Minister Boris Johnson’s Canada-style trade deal.
The mandate emphasized on the need for a ‘level playing field’ and for the UK to be more aligned to current EU rules. Meanwhile, Johnson has been emphasizing more on the need for UK sovereignty.
Hence, the key focus will be on the UK’s mandate for Brexit negotiations, which will be published on Thursday and will play a key role in influencing the near-term sentiment surrounding the sterling.
On the other hand, the Japanese yen continued benefitting from the global flight to safety, led by growing market concerns over the outbreak of the deadly coronavirus and its impact on the global economy.
Meanwhile, the latest leg of a sudden fall of around 70-75 pips over the past couple of hours could be attributed to a turnaround in the global risk sentiment, as depicted by a fresh leg down in equity markets.
It will now be interesting to see if the cross is able to find any support at lower levels or the current fall marks a fresh bearish breakdown amid absent relevant market moving economic releases from the UK.
Technical levels to watch
Immediate support is pegged near the 142.35-30 region, below which the cross might turn vulnerable to slide below the 142.00 mark and test its next major support near the 141.60-50 region. On the flip side, any meaningful positive move back above the 143.00 mark now seems to confront some fresh supply near the 143.25-30 region and is more likely to remain capped.
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