- A combination of factors continued exerting some heavy pressure on GBP/JPY.
- Speculations about another lockdown in the UK undermined the British pound.
- The risk-off mood benefitted the safe-haven JPY and added to the selling bias.
The GBP/JPY cross maintained its heavily offered tone through the mid-European session and was last seen trading just below the 134.00 mark.
The cross prolonged a two-week-old bearish trajectory and witnessed some strong follow-through selling on the first day of a new trading week. The downfall was sponsored by a combination of factors, including the offered tone surrounding the British pound and a strong pickup in demand for the safe-haven Japanese yen.
Reports that the UK could be headed for another national lockdown of two weeks to counter a resurgence in COVID-19 cases took its toll on the sterling. The UK government's Chief Scientific Adviser Sir Patrick Vallance acknowledged on Monday that they are in a situation where coronavirus infection numbers are clearly increasing.
Meanwhile, concerns about the ever-increasing coronavirus cases weighed heavily on investors' sentiment and triggered a fresh wave of the global risk aversion trade. This, in turn, provided a strong boost to the Japanese yen's safe-haven status and further contribute to the GBP/JPY pair's ongoing slide.
Apart from this, the downfall could further be attributed to some technical selling below the previous swing lows, around the 134.55 region. Meanwhile, RSI (14) on the daily chart is already flashing oversold conditions and warrant some caution for bearish traders or positioning for any further near-term depreciating move.
Technical levels to watch
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