GBP/JPY drops to 1-week low on softer risk tone

  • Risk tone remains heavy as headlines concerning Iran/trade are on the rounds.
  • The odds favoring the need for easy monetary policy are getting stronger after the Fed Chair’s Testimony.

Not only the US-China trade tension and rumors of the US air strikes in Syria but news that Iranian boats attempted the British tanker seize also strengthened the markets’ risk-off momentum. With this, GBP/JPY declines to the lowest since July 03 as it trades near 135.35 during early Thursday.

The US and China seem at loggerheads despite recent truce as media releases from both the nations keep raising doubts over the US President Donald Trump’s upbeat statements at the end of G20 that previously triggered broad risk-on.

Adding to the woes was the US Federal Reserve Chairman Jerome Powell’s Testimony that rubberstamped 25 basis points (bps) of a rate cut in their next meeting and cited a downside risk for inflation.

As if aforementioned catalysts weren’t enough to challenge risk-averse traders, rumors of the US readying airstrikes over some part of the Iranian targets in Syria, coupled with the CNN news indicating Iranian boats’ attempt to seize the British oil tanker, added further strength into the safe-havens like Japanese Yen (JPY). Macro risk barometer, the US 10-year treasury yield trims nearly 2 bps to 2.042% by the press time.

Given the lack of major data, investors can keep concentrating on the trade/political headlines to determine the near-term market direction.

Technical Analysis

With the 14-day relative strength index (RSI) trading near oversold territory, the price might attempt a recovery towards recent high surrounding 136.30 ahead of questioning the monthly top near 137.80, if not then late-September 2016 high around 132.50 and the year 2019 low at 131.79 can please the bears.

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