GBP/JPY struggles around 130.00 after Tuesday’s Doji, equities in the spotlight
|- GBP/JPY seesaws near 18-month low after flashing a trend reversal suggestion candlestick the previous day.
- UK announced fresh measures worth 15% of GDP to bridge short-term financing needs to businesses.
- EU-UK trade talks in limbo amid coronavirus outbreak.
- Stocks rallied on further stimulus hope, US/Japan affirmed commitment to use all weapons to fight against the pandemic.
With the policymakers in the US and Japan showing readiness to ward off the coronavirus impact, the market’s risk-tone recovers off-late. That said, the GBP/JPY pair takes around to 130.00, currently at 129.90, amid the initial Tokyo session trading on Wednesday.
The latest comments from the US treasury, relying on the talks between the Japanese Finance Minister Taro Aso and the US Treasury Secretary Steve Mnuchin, mentioned that both the policymakers reaffirmed commitment to using all appropriate policy measures to achieve strong growth and guard against downside risks.
Earlier, the US Fed announced another measure to fight against the pandemic via short-term credit to primary dealers.
On the negative side, S&P Global Ratings said that the Asia-pacific economic growth in 2020 will more than halve to less than 3% due to the deadly virus. Further, the news that the disease is now present in all of the US 50 states and the DC offered additional burden to the risk-tone.
While portraying the risk-tone, the US 10-year treasury yields mark two basis points (bps) of gains to 1.018% whereas stocks in Japan and the US Futures mark mixed pictures amid expectations of further easing from the policymakers.
It should also be noted that the recently upbeat trade data from Japan played its role to additionally pressure the quote downwards whereas pessimism surrounding the UK’s coronavirus scenario, despite the government’s action, acted as an extra filter.
Technical Analysis
Although Doji candlestick formation on the daily chart and oversold RSI conditions favor the pair’s pullback moves, a three-week-old descending trend line at 133.00 question the recovery moves. Alternatively, the pair’s declines below Tuesday’s low of 128.60 will defy the trend reversal pattern and suggests further downside towards the year 2019 lows near 126.70/65.
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