- GBP/JPY is making a go of the upside, knocking on the doors of R1 at 140.06 with a high of 140.07 from a low of 138.60.
- GBP/JPY spiked on pro Brexiteers seen voting with PM May all day long at tomorrow's Commons vote on Brexit deal, supporting a bid in sterling across the board.
- USD/JPY bear pressure slowing down upside in the crosses.
The day before the Brexit meaningful vote, volatility is building up with a number of headlines hitting the wires on Monday. We had Friday's sentiment floating around Asia with respect to a delay to Article 50, coupled with PM May's speech, a resignation of the Conservative whip and now news from ITV's Robert Peston reporting that an "Influential Tory Brexiter MP" told him, "he and his ERG Brexiter colleagues "will be voting with Theresa May and the government all day tomorrow".
The pound is better bid on that mix on the count of 1) either a deal is improved and uncertainty is diminished, the BoE can get back to business, 2) A delay of Article 50 gives time for PM May to negotiate a better deal, releasing some pressure of a hard Brexit. However, prospects of a leadership challenge by Labour on the likely event that May's deal doesn't pass tomorrow's vote, given that Hilary Benn will likely withdraw his amendment clearing the way for the ERG to vote against May, could come as soon as Wednesday, hours after the defeat.
The yen is likely to maintain form in playing out is the role as the safe haven to go to in times of great uncertainty, which will likely limit the upside in GBP/JPY, unless, there is strong sentiment for a second referendum as likely being the most positive for the pound o the prospects of 'the remainers' winning next time around. "The GBP upside would clearly be higher where it is a straight choice between May’s deal and Remain," analysts at ING Bank argued.
The cross is travelling between the 23.6 and 38.2% Fibo retracements of the early 2018 decline with price meeting the 21-D SMA resistance in what is shaping up to be a doji candle on the daily sticks give the thin liquidity and volatility over Brexit noise. A break of R1 opens R2 located at 140.73. The 38.2% retracement Fibo was respected as a support area in Dec as a target to break located around 141.30. On the downside, 138.85 is the daily pivot guarding S1 at 138.19. 131.80 is the downside target and YTD lows.
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