- GBP / JPY has recovered sharply from previous lows below the 139.00 level to above 139.50.
- However, the British pound continues to struggle as Brexit optimism fades and is the worst performing G10 currency.
The GBP/JPY it has rebounded sharply from lows below 139.00 set shortly before the US cash open at 14:30 GMT. Currently the pair is trading around 139.70, but it is still trading with losses of just under 30 pips, or just over 0.2% on the day.
GBP struggles as Brexit hopes fade
A string of negative headlines about the state of Brexit negotiations on Wednesday have undermined hopes that a deal will be reached by the end of this week. Around the time of the opening of the EU cash (08: 00GMT), an EU diplomat said that the EU chief negotiator for Brexit, Michelle Barnier, told the EU envoys that differences in the three key points (a reference to the salient issues of fisheries, state aid and governance) and that a deal is “still in play”.
Thereafter, GBP / JPY fell below 1.3400 as optimism on Tuesday about the two sides entering “the tunnel” and hopes of a deal by the end of the week faded. The pair then saw an extension of the low around midday Europe when the Times reported that France and other hard-liners are pushing for a no-deal Brexit if the UK does not make concessions, hitting lows below 1.3900.
However, buyers on the dips entered aggressively. Indeed, despite today’s not-so-optimistic news about the state of the talks, most analysts still suspect a deal will be reached, given how much it is in the interest of both the EU and the UK not to cause more. damage to their economies affected by Covid-19.
GBP / JPY prices continue to trade within the wedge pennant
GBP / JPY price action on Wednesday is consistent with a continued contraction within a medium-term gap; Since the beginning of November, the GBP / JPY has shown an upward trend and has well respected the trend line that joins the lows of October 30, November 5, 6, 19, 27 and Wednesday. On the positive side, prices have not managed to substantially exceed 140.00; prices rose slightly above the November 11 high of 140.33 on Wednesday morning.
With prices consolidating in this way, a breakout is more and more likely in the near-term future. If there were a breakout to the upside, that would set the stage for an eventual bullish move towards the yearly high of 142.70 set on September 1. 138.20, which also coincides with the pair’s 21-day moving average (DMA). Below and beyond the psychological level of 138.00 is the November 19 low of 137.10, an area of resistance that comes into play just above the pair’s 50 DMA at 137.08.
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