GBP/JPY slides to over one-week lows, around mid-154.00s

The GBP/JPY cross continued losing ground through the first half of the European session and dropped to one-and-half-week lows, around the 154.55 region in the last hour.

The cross witnessed some follow-through selling for the second consecutive session on Monday and prolonged its recent pullback from the 156.00 mark, or the highest level since February 2018. This also marked the fifth day of a negative move in the previous six and was sponsored by a combination of factors.

The British pound's relative underperformance could be attributed to doubts over the UK government's plan to reopen the economy on June 21 in light of the spread of the so-called Delta variant. Apart from this, the souring UK-EU relationship over the Northern Ireland protocol further acted as a headwind for the sterling.

Ahead of Brexit talks later this week, the EU's ambassador to the UK said that the level of trust between the two powers was low. That said, worries about the economic fallout from an extension of the state of emergency in Tokyo and eight other prefectures might cap gains for the JPY and help limit losses for the GBP/JPY cross.

There isn't any major market-moving economic data due for release from the UK on Monday. This further makes it prudent to wait for some strong follow-through selling before confirming that the GBP/JPY cross might have already topped out in the near term and positioning for any meaningful corrective pullback.

Technical levels to watch