- GBP/JPY looks for clear direction amid a year-end trading lull.
- Fears of hard Brexit, US-China tussle keep risk-off on the driver’s seat.
- BOJ minutes fail to provide strong clues, Christmas holidays will restrict the pair’s momentum.
GBP/JPY trades near 141.60 during early Tuesday. The pair ignores recently published minutes of the Bank of Japan’s (BOJ) October month monetary policy meeting as trade/Brexit fears keep the Japanese Yen (JPY) comparatively stronger than the British pound (GBP).
The recently released BOJ minutes highlighted fears of downside risk but didn’t downplay the policymakers’ agreement that the economy is well in direction to price stability target.
Following the UK Parliament’s passage of the Prime Minister (PM) Boris Johnson’s EU (Withdrawal Agreement) Bill, fears of a hard Brexit among the European Union (EU) have increased drastically. The reason could be attributed to the Tory leader’s statement, “This will be with no alignment on EU rules, but instead with control of our own laws, and close and friendly relations."
Adding to the pessimism were comments from the Irish PM Leo Varadkar who said that it is going to be difficult to secure a good trade deal for Ireland, principally because Boris Johnson has fixed on a harder Brexit than we anticipated. Furthermore, news of the German Pharmacy to be harshly affected in case of a hasty departure of the UK has added risk to the market’s trade sentiment.
Elsewhere, Chinese media have been criticizing the US despite allowing the recent tariff relief. On the flip side, US President Donald Trump cheered relations with China while signaling to sign the phase-one deal.
With this, the US 10-year treasury yields witness a downside pressure to 1.926% while the S&P 500 Futures fails to portray the same.
Investors will have a lack of catalysts while looking forward as the economic calendar is almost dead while nearing the Christmas. As a result, trade/Brexit headlines will be the key to watch for near-term direction.
Technical Analysis
50-day Simple Moving Average (SMA) near 141.15 acts as the immediate support holding the key for pair’s further declines to 140.00 and November month low near 139.30. On the contrary, buyers will look for entry beyond a 21-day SMA level of 142.67.
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