- GBP/JPY witnessed a dramatic intraday turnaround from two-week tops on Tuesday.
- The sterling was weighed down by stronger USD and increasing fuel crisis in the UK.
- The risk-off impulse benefitted the safe-haven JPY and contributed to the selling bias.
The intraday selling around the sterling picked up pace in the last hour and dragged the GBP/JPY cross to fresh daily lows, around the 151.65 region.
The cross struggled to capitalize on its intraday positive move to two-week tops, instead witnessed a turnaround and has now retreated nearly 100 pips from levels just above mid-152.00s. The downfall was exclusively sponsored by the emergence of heavy selling around the British pound and the risk-off impulse in the markets.
A broad-based US dollar strength, along with signs of the fuel crisis in the United Kingdom turned out to be a key factor that acted as a headwind for the GBP. Fears that a driver shortage – that caused problems for a range of industries in the recent months – would hit fuel supply led to panic buying and long queues at many petrol stations.
Meanwhile, the intensifying energy crisis in Europe and China – amid soaring gas and oil prices – and persistent about China Evergrande Group's unsolved debt crisis took its toll on the risk sentiment. This was evident from a weaker tone around the equity markets, which benefitted the Japanese yen's relative safe-haven status against its British counterpart.
With the latest leg down, the GBP/JPY cross has now reversed a part of the previous day's positive move. A subsequent slide below the 151.35-30 horizontal support will shift the near-term bias in favour of bearish traders. The next relevant support is pegged near the 151.00 mark, which if broken decisively should pave the way for further losses.
Technical levels to watch
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