GBP/JPY reverses a dip to 153.00 area, turns flat ahead of Bailey’s speech
|- GBP/JPY witnessed some profit-taking from the 154.00 mark, or over three-year tops.
- The risk-off mood benefitted the safe-haven JPY and exerted some downward pressure.
- The upbeat UK economic outlook underpinned the GBP and helped limit deeper losses.
The GBP/JPY cross reversed an early North American session dip to the 153.00 mark and was last seen trading in the neutral territory, around mid-153.00s.
The cross struggled to capitalize on the previous day's strong positive move to over three-year tops and witnessed a modest intraday pullback from the 154.00 mark. A sharp fall in the global equity markets forced investors to take refuge in the traditional safe-haven Japanese yen. This, in turn, was seen as a key factor that prompted some profit-taking around the GBP/JPY pair.
That said, the downside remains cushioned amid growing optimism about the UK economic recovery from the pandemic. A sharp drop in COVID-19 deaths and new cases allowed the UK Prime Minister Boris Johnson to confirm the next stage of lockdown easing in England. This, along with the receding risk of an imminent Scottish referendum on independence acted as a tailwind for the British pound.
Moreover, investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of a scheduled speech by the Bank of England Governor Andrew Bailey. Apart from this, Wednesday's release of the prelim UK GDP report for the first quarter of 2021 will play a key role in influencing the sterling and provide a fresh directional impetus to the GBP/JPY cross.
From a technical perspective, the overnight sustained break through the 152.30-40 strong horizontal resistance and a subsequent move beyond the previous YTD tops favours bullish traders. Some follow-through strength beyond the 154.00 mark will reaffirm the constructive outlook and set the stage for an extension of the recent strong positive momentum witnessed over the past three weeks or so.
Technical levels to watch
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