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  • A combination of factors prompted some follow-through selling around GBP/JPY on Wednesday.
  • Coronavirus jitters weighed on investors’ sentiment and boosted demand for the safe-haven JPY.
  • Persistent Brexit-related uncertainties undermined the GBP and further added to the selling bias.

The GBP/JPY cross witnessed some fresh selling during the early European session and dropped to near two-week lows, around the 135.60 region in the last hour.

The cross extended its recent pullback from the 137.65 region and witnessed some follow-through selling through the first half of the trading action on Wednesday. The prevalent risk-off environment forced investors to take refuge in the safe-haven Japanese yen, which, in turn, was seen as a key factor exerting pressure on the GBP/JPY cross.

New coronavirus cases have been growing at an alarming pace in the United States and Europe and might force governments to impose new restrictions. Investors remain worried that renewed lockdown measures to curb the second wave of COVID-19 infections could prove detrimental for the already fragile global economic recovery, which weighed on investors’ sentiment.

On the other hand, the British pound was being pressured by persistent Brexit-related uncertainties. Despite an extension of the UK-EU Brexit talks and reported progress being made in numerous areas, the impasse on the matter of the future access of EU fishing fleets to UK waters has dampened prospects for an immediate breakthrough.

Apart from this, Wednesday’s downfall could further be attributed to some technical selling below the very important 200-day SMA. hence, some follow-through weakness back towards challenging October monthly swing lows, around the key 135.00 psychological mark, looks a distinct possibility amid absent relevant market moving economic releases.

Technical levels to watch