GBP/JPY pulls back from multi-month top as risk sentiment dwindles

  • GBP/JPY fails to hold above 140.00 mark as mixed signals from Brexit, trade negatively affect risk-tone.
  • Brexit talks are upbeat but no signs of a deal, Labor leader prepares for the second referendum while doubts over the PM Johnson’s victory at home prevail.
  • China still to invite the US diplomats for trade talks, US-China political tussle continues.

With an additional blow to risk sentiment, GBP/JPY steps back from the five-month high while trading near 139.40 during Asian morning session on Thursday.

Latest comments from the European Parliament’s first Vice President Mairead McGuinness and that of the Bank of England (BOE) Governor Mark Carney flash mixed signals. However, the opposition Labor party leader Jeremy Corbyn’s readiness for a second referendum, as per The Times, coupled with hardships for the Prime Minister (PM) Johnson’s Brexit deal to pass through the Parliament, doubts Brexit optimism.

Elsewhere, the United States’ (US) Treasury Secretary Steve Mnuchin recently poured cold water on the trade-positive comments by President Donald Trump while saying that they are still waiting for China’s invitation for further talks that will include some tensed topics.

Furthermore, US-China political fight continues with China’s latest retaliation over the US State Department’s communication that requires diplomats from the dragon nation to give prior notice of any meetings with state, local and municipal officials, as well as at educational and research institutions. The global superpowers were earlier at loggerheads over Hong Kong intervention.

Having said that, the US 10-year treasury yield extends declines to sub-1.73% by the press time while Gold and the Japanese Yen (JPY) benefits from the move.

Investors will now look forward to more headlines on Brexit/Trade issues, coupled with the United Kingdom’s (UK) Retail Sales data, amid an absence of Japanese catalysts.

Technical Analysis

While buyers look for a sustained break above 61.8% Fibonacci retracement level of the current year declines, at 140.35, to target mid-February lows nearing 141.15/20, sellers can sneak in if prices drop below 200-day Simple Moving Average (SMA) level of 138.73.

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