Blog: GBP/JPY seesaws around 133.00 as Brexit-positives battle broad pessimism – FXStreet

  • GBP/JPY refrains from extending the previous day’s weakness below 132.76.
  • Brussels’ readiness to ease on “level playing field” will offer a boost to Brexit talks.
  • Easing of coronavirus restrictions, hopes of tax relaxation favor pound.
  • Fears of the virus wave 2.0, US tariffs question the bulls.

GBP/JPY fades the recovery moves from 132.80, takes a U-turn from 133.15, while trading around 133.00, up 0.05% on a day during the early Thursday. In doing so, the pair defies Wednesday’s downbeat performance to bounce off a multi-day-old support line.

Policymakers from the European Union (EU) finally seem to have realized that the UK diplomats won’t step back from their Brexit bias. As a result, Brussels signals easing of condition that earlier stopped trade negotiations with their British counterparts. However, the “level playing field” isn’t the only barrier ahead of the next week’s key talks. Other than the Brexit news, the British currency might have reacted to further re-opening of economy and signals of tax benefits to shrug off broad fears.

Among the major negative catalysts, the US threats to levy tariffs on the $3.1 billion worth of the EU/UK goods and escalating fears of the virus resurgence in America are the major ones to challenge the trading sentiment. While the UK is yet to respond to the Trump administration’s threat, the bloc has already suggested a downbeat impact on EU-US relations. Elsewhere, the US marks the biggest surge in fresh virus numbers with record-high hospitalization in Texas and a jump in Californian cases.

Market sentiment remains grim amid the broad pessimism. While portraying the same, US 10-year Treasury yields and stocks in Asia remain on the back foot.

Moving on, Japan’s All Industry Activity Index for April and the results of the UK’s CBI trade survey figures might entertain the market players. However, major attention will be given to the qualitative factors for near-term trade direction.

Technical analysis

50-day SMA, near 133.40 now, questions the pair’s pullback from an ascending trend line since March 18. Though, sellers will look for fresh entries below the weekly low close to 131.75.

 

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