- GBP/JPY came under some heavy selling pressure in reaction to the incoming Brexit headlines.
- The formation of a bullish flag pattern supports prospects for the emergence of some dip-buying.
- A convincing break below mid-154.00s is needed to negate the constructive set-up.
The GBP/JPY cross witnessed a dramatic turnaround on Wednesday and tumbled nearly 85 pips from the intraday swing highs, around the 155.30 region. The downward momentum dragged the cross to two-week lows, around mid-154.00s in the last hour.
The sharp intraday fall was sponsored by some heavy selling around the British pound in reaction to the latest Brexit headlines. The European Commission Vice President of Interinstitutional Relations and Foresight, Maroš Šefčovič reiterated that the EU will react swiftly if the UK takes any unilateral action on border controls.
Apart from this, speculations that the UK may delay plans to end restrictions fully on June 21 – amid the spread of the so-called Delta variant – further acted as a headwind for the sterling. This, along with a strong pickup in demand for the safe-haven Japanese yen, exerted some additional downward pressure on the GBP/JPY cross.
From a technical perspective, the GBP/JPY cross was last seen hovering near support marked by the lower boundary of a short-term descending channel. Given the recent strong positive move, the mentioned trend-channel seemed to constitute the formation of a bullish continuation pattern on short-term charts.
The constructive set-up is reinforced by the fact that technical indicators on the daily chart – though have been losing positive traction – are still holding in the bullish territory. That said, a convincing break below the trend channel will negate the positive outlook and prompt some aggressive technical selling.
The GBP/JPY cross might then extend its corrective pullback from multi-year tops and accelerate the slide to test the 154.00 round figure. Some follow-through selling has the potential to drag the cross further towards the next relevant support near the 153.25-20 horizontal zone en-route the 153.00 mark.
On the flip side, the key 155.00 psychological mark now seems to act as an immediate hurdle. A sustained move beyond will reaffirm the bullish flag pattern and push the GBP/JPY cross towards the trend-channel resistance, currently around mid-155.00s.
GBP/JPY 4-hour chart
Technical levels to watch
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.
Recommended content
Editors’ Picks
EUR/USD retreats below 1.0850 ahead of Fedspeak
EUR/USD stays under modest bearish pressure and trades in negative territory slightly below 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD stays under modest bearish pressure near 1.2650
GBP/USD edges lower toward 1.2650 after posting marginal losses on Thursday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to gain traction. Fed policymakers are scheduled to speak later in the day.
Gold holds steady above $2,380, Fed speakers in focus
Gold trades with a positive bias on Friday and holds above $2,380. The benchmark 10-year US Treasury bond yield stays flat near 4.4% following Thursday's rebound, allowing XAU/USD to keep its footing ahead of speeches from Fed officials.
XRP steadies at $0.51 as Ripple plans to expand XRP Ledger, custody services in Africa
Ripple hovers close to $0.51 on Friday, above the psychologically important $0.50 level, as traders await the court ruling of the lawsuit against the US SEC and amid new commitments from the firm to expand its services in Africa.
Disputes and De-risking: US-China trade dispute changes trade flows
The bilateral trade dispute between the US and China is entering a new round and is leading to renewed discussions about the deglobalisation of global trade in goods.