GBP/JPY probing Tuesday’s 139.80 high despite continued Brexit deadlock

GBP/JPY is trading near its highs for the week, having at one point matched Tuesday’s high at 1.3980, before pulling back slightly. On the day, the pair trades with gains of just over 30 pips or 0.2%.

GBP bid despite Brexit deadlock

Today’s Brexit updates indicate that negotiations between the EU and UK are still at a deadlock, with the French Foreign Minister publicly calling out the UK for running down the clock, something which well-connected UK sources have reportedly said the UK government sees as a way to put public pressure on the UK to make further concessions. Other EU sources have reportedly said that this was not a good week for talks. This comes on the back of EU Commission President von der Leyen saying on during the early part of the European session on Wednesday that she still could not say yet if there would be a deal.

Regardless of signs of continued deadlock, GBP has been largely bulletproof. Market’s seem to be showing either signs of Brexit headline fatigue or confidence (or complacency…) that regardless of what brinksmanship goes on over the coming days, a deal is, in the end, the most likely eventuality given that it is strongly in the economic interests of both sides in the midst of the much larger Covid-19 health and economic crisis.

GBP was also largely unresponsive to UK Finance Minister Rishi Sunak’s sobering one-year spending review and Office of Budget Responsibility forecasts, which forecast a UK deficit of £394B in 2020/2021, which equates to 19% of GDP (the highest deficit in the country’s more than 300-year history).

GBP/JPY eyes test of 140.00

With GBP/JPY probing Tuesday’s highs at 139.80, a break is seemingly becoming ever more likely. This would open up a test of the psychological 140.00 level. If this area of resistance also goes, then the route towards a test of highs of the month at 140.32 would be cleared.

Conversely, to the downside, notable areas of support include the 139.00 round number, which also happens to coincide with the 61.2% Fibonacci retracement from the September high at 142.74 to low at 133.03. Not far below this area of support is the 16 November high at 138.88.

GBP/JPY eight hour chart