- GBP/JPY extends pullback from 137.75 to refresh the intraday high.
- Signals of further stimulus from the UK beat welcome Tokyo CPI data.
- The risk-on sentiment, Brexit optimism add strength to the recovery moves.
GBP/JPY refreshes intraday high to 138.80, up 0.19% on a day, amid the Asian session on Tuesday. The pair eased from two-month high the previous day but failed to drop far below the open and hence portrayed a Doji Candlestick formation suggesting a reversal of the previous upside. However, recent optimism in the market takes clues from the news suggesting Tory government’s one more stimulus package and signals of easy Brexit talks favor the bulls.
Financial Times (FT) came out with the news citing the UK government’s another attempt to revive the economy, this time via helps to the construction sector. The update marked £900 million as a planned outlay.
Additionally, Reuters also quoted an anonymous source to say that the European Union (EU) is willing to compromise to rescue troubled Brexit talks by softening its demand that Britain heeds EU rules on state aid in the future.
Elsewhere, market players cheer vaccine hopes and clues of further stimulus from the BOJ to ignore the US policymakers’ delay in announcing the much-awaited aid package. The same shrugs of warnings from the World Health Organization (WHO) President Dr. Tedros Adhanom Ghebreyesus.
While portraying the market sentiment, Japan’s Nikkei 22 rises 1.36% whereas US 10-year Treasury yields and S&P 500 Futures stay positive, though with little gains.
Talking about data, Japan's Tokyo Consumer Price Index (CPI) for July managed to cross 0.4% forecast and 0.3% prior with 0.6% YoY in July.
Looking forward, a light calendar keeps the pair traders directed to risk catalysts for fresh impetus. As a result, virus updates and news concerning the US Congress will be the key.
Technical analysis
Bulls should wait for a clear break of 139.00 to negate the previous day’s Doji formation and aim for June month’s top near 139.74. On the contrary, a downside break below 200-day SMA level of 137.55 will favor the bears.
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