GBP/JPY drops back sharply amid risk-off, but finds good support in mid-152.00s

  • GBP/JPY pulled back sharply on Friday amid a broader downturn in risk sentiment, but found good support in the mid-152.00s.
  • The pair may well struggle next week if risk appetite continues to worsen and it breaks key support.

GBP/JPY came under pressure on Friday, dropping back from Asia Pacific levels close to 154.50 to as low as 152.50 in the late European morning and in doing so dropped below its 50-day moving average at 153.47. The pair dropped back sharply as a result of a broad deterioration in risk appetite due to lockdown concerns in Europe that saw risk-sensitive currencies (like GBP) dumped in favour of safe-haven currencies (like JPY).

But the pair found decent support just above 152.50, given that this level also coincides with the prior monthly lows set last Thursday and Friday. Buying interest in the mid-152.00s was likely heightened given the proximity to the pair’s 200DMA, which resides at 152.30. Ahead of Friday FX market close and as trading conditions die down, the pair has managed to recover back to the north of the 153.00 level to trade in the 153.20s, with the 50DMA for now acting as resistance. At current levels, the pair trades with losses of about 0.6% on the day.

If the European Covid-19/lockdown news continues to worsen over the weekend, there is every chance that the broader market’s bid for havens may continue into next week. In this scenario, GBP/JPY could well be at risk of breaking below support in the mid-152.00s and its 200DMA. From a technical standpoint, this would be bearish, as there are no further key areas of resistance for the pair all the way down to the 149.00s.

While GBP is vulnerable to a downturn in sentiment, domestic UK fundamentals, for now, do not seem to provide too much reason to be bearish GBP. It seems highly likely that in December, the BoE will become the first major central bank to start hiking interest rates post-Covid-19. On Friday, BoE Chief Economist Huw Pill said that the burden of proof was on those who wanted to wait to hike rates, not on those who wanted to get the hiking cycle started. Central bank policy divergence, thus, leans in favour of a higher GBP/JPY.

Meanwhile, the Covid-19 situation in the UK is nowhere near as dire as it is in mainland Europe. Infection rates in the UK have been broadly stable over the past few months and the country’s booster vaccine rollout, which has already now more than covered the most vulnerable categories, has already been hailed a success. While lockdowns might be a story for the EU, they may not be for the UK this winter.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD struggles to rebound, holds near 1.1150 after US data

EUR/USD trades around 1.1150 in the early American session on Friday as investors assess the latest inflation data from the US. According to the US Bureau of Economic Analysis, Core PCE Price Index rose to 4.9% on a yearly basis in December from 4.7% in November, surpassing the market expectation of 4.8%. 


GBP/USD clings to small gains above 1.3400 on mixed US data

GBP/USD posts modest daily gains slightly above 1.3400 on Friday as the dollar rally loses steam. The data from the US showed that the core PCE inflation edged higher to 4.9% in December. On a negative note, Personal Spending contracted by 0.6% on a monthly basis.


Gold recovers modestly after US data, stays below $1,800

Gold managed to stage a rebound from the multi-week low it set below $1,780 but continues to trade deep in the red near $1,790. The benchmark 10-year US Treasury bond yield is rising more than 1% on the day after US data, limiting XAU/USD's recovery.

Gold News

Bitcoin Weekly Forecast: Federal Reserve cannot tame BTC’s uptrend

Bitcoin has experienced some significant losses over the past few weeks, with a more dramatic drop occurring this week after the Fed's decision was announced. As losses have extended and BTC has entered into the $30,000 zone, concerns regarding Bitcoin being in a bear market have increased.

Read more

Apple share price set to rise after another record quarter

With the Nasdaq closing at its lowest level in seven months yesterday, the Apple share price has also found itself on the end of the recent weakness in tech shares, down over 12% from its record highs in early January.

Read more