GBP/JPY: Brexit, coronavirus challenge bulls above 151.00
- GBP/JPY struggles for traction after two-day uptrend, edges higher of late.
- Market sentiment dwindles amid mixed updates on virus, Brexit and a light calendar.
- Japan Industrial Production improved in July, jobs data came in less impressive.
- British traders’ return from the extended weekend, risk catalysts eyed for fresh impulse.
GBP/JPY retreats to 151.20 during a sluggish Asian session on Tuesday. In doing so, the cross-currency pair pauses after a two-day rebound from the short-term support line amid mixed clues and mildly offered Treasury yields.
The US 10-year Treasury yields drop for the third consecutive day to test the one-week low surrounding 1.277% at the latest. On the contrary, the S&P 500 Futures remains directionless even as its Wall Street benchmark refreshed record top on Monday.
The contrasting covid conditions in Japan and the UK, as well as Brexit fears, join the market chatters over the Fed’s next moves to challenge the pair traders of late.
The UK reports the first below 30K daily infections in two weeks the previous day. It should be noted, however, that the “Infections have dropped by 17 percent in seven days - while deaths have increased by 20 percent,” per the UK Mirror. On the other hand, Japanese policymakers remain concerned over the expiry of the virus-led emergencies in several prefectures as the covid cases remain firmer around the all-time high.
Talking about Brexit, the UK is up for striking a post-Brexit trade deal with New Zealand. However, pessimism surrounding the EU-UK relations over Northern Ireland (NI) protocol and recent updates to reject the call for new visas of truck drivers challenge the GBP/JPY buyers.
It’s worth observing that the firmer prints of Japan’s Industrial Production for July, -1.5% versus -2.5% forecast, join softer Unemployment Rate of 2.8% compared to 2.9% expected previous readouts to favor the risk-on mood and hence underpin the GBP/JPY bulls. Though, Jobs/Applicants Ratio of 1.15 against 1.12 market consensus and 1.13 prior question the upside moves.
Given the lack of clear direction during the off in the UK, the GBP/JPY traders await the British traders’ return on Tuesday, coupled with clarity over Brexit and covid for fresh direction. Also important will be how this week’s US jobs report could justify Fed Chair Jerome Powell’s cautious optimism.
Technical analysis
The weekly support line, around 150.95, precedes a 10-DMA level of 150.72 to restrict short-term GBP/JPY downside. However, bulls remain skeptical unless crossing the 50-DMA level near 152.15.