- GBP/JPY staged a goodish rebound from the lowest level since July 21 set earlier this Wednesday.
- Worries that job losses in the UK will rise after the furlough scheme ends might cap gains for the GBP.
- COVID-19 jitters and a softer risk tone could benefit the safe-haven JPY and also act as a headwind.
The GBP/JPY cross maintained its bid tone through the first half of the European session and was last seen hovering near daily tops, around the 150.80-85 region.
A combination of factors assisted the GBP/JPY cross to rebound from the 150.30 region, or four-week lows touched earlier this Wednesday and recover a part of the previous day's losses. The Japanese yen was pressured by an extension of the stage of emergency in Tokyo and seven more prefectures. Apart from this, a modest short-covering move around the British pound provided an additional boost to the cross.
The cross, for now, seems to have snapped four consecutive days of the losing streak, though any meaningful recovery still seems elusive. Investors remain worried that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery. This, along with political tensions in Afghanistan, continued weighing on investors' sentiment. This, in turn, should act as a tailwind for the safe-haven JPY.
On the other hand, worries that job losses in the UK will rise after the furlough scheme ends in September and Wednesday's softer UK consumer inflation figures for July could undermine the sterling. This might further collaborate towards capping the upside for the GBP/JPY cross, at least for now. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the cross has bottomed out.
Technical levels to watch
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