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  • GBP/JPY seesaws near the lower band of two-day-old trading range.
  • Japan’s Industrial Production, Retail Trade came in mixed.
  • Stimulus hopes battle covid, reflation woes amid a quiet session.
  • Off in UK, US could disappoint momentum traders

GBP/JPY extends Friday’s sideways grinds, downbeat of late, around 155.80 as markets in Tokyo kick-start the week’s trading. The risk barometer jumped to the highest since early 2018 on Thursday but cautious sentiment surrounding the British pound (GBP) joins mixed catalysts and the coronavirus (COVID-19) woes from Japan to test the bulls.

Recently, Japan’s Retail Trade for March dropped -4.5% versus +1.2% prior MoM but registered a 12% YoY jump compared to 5.2% previous readouts. Further, preliminary readings of April Industrial Production also followed the suit with MoM figures easing below 4.1% forecast and 1.7% earlier reading to 2.5% whereas yearly data marked 15.4% run-up versus 3.5% market consensus and 3.4% noted during March.

Other than the mixed data, risk catalysts also fail to provide any clear direction to GBP/JPY traders. US President Joe Biden’s push for a $6.0 trillion budget confronts the recent jump in the US inflation figures to confuse markets.  

At home, the government’s readiness for more stimulus fails to hide the worries over pandemic ahead of the key Olympic games in Japan. The odds of having a Sino-American trade deal, despite the US-China tussles, add to the market’s uncertainty. Furthermore, comments from European Union’s (EU) Chief Brexit negotiator Maros Sefcovic, warning the UK over the Northern Ireland (NI) protocol ahead of the next week’s key talks add to the market pessimism.

Amid these plays, S&P 500 Futures print mild gains around 4,200 threshold but the US 10-year Treasury yield remains sluggish.

Moving on, an off in the US and the UK will trouble the momentum traders and hence further consolidation of the GBP/JPY prices can’t be ruled out.

Technical analysis

Repeated failures to cross the 156.00 hurdle on a daily closing basis seem to drag GBP/JPY towards the previous resistance line retest, at 155.30 by the press time. It should also be noted that a dragonfly Doji at the multi-month high adds strength to the pullback moves.