- GBP / JPY fell modestly below 150.00 on Tuesday, but has since rallied to 150.50.
- The bears will now target a test of the April-October lows in the 148.50-149.50 region.
- The pair continues to suffer amid increased demand for safe-haven assets as markets worry about uncertainties related to Omicron.
The GBP/JPY it continued to decline on Tuesday, recovering from where it was last Friday after Monday’s lateralized session. The pair fell below 151.00 during the Asian session, as increased demand for safe havens boosted the yen after comments from Moderna’s chief executive officer sparked concerns about the vaccine’s efficacy and triggered outflows of risk aversion. The pair momentarily fell below the key 150 level in previous trading, but has since rallied to around 150.30.
Since falling below key support at the 152.50 zone in the form of a series of recent lows and the 200 DMA at the end of last week, when Omicron fears first hit the market, GBP / JPY did not has looked back. The pair has now retraced more than 5.0% from the October highs above 158.00 and the bears are now looking at an imminent test of the April-October lows in the 148.50-149.50 zone. However, with the pair’s Relative Strength Index rapidly approaching oversold territory at 32 (oversold is classified below 30.00), this may be a difficult area to break out of in the next few days.
But the markets remain highly motivated by the headlines related to Omicron. There is still a high degree of uncertainty regarding how well the variant will be able to evade natural and vaccine-induced immunity, as well as regarding its transmissibility and symptoms. The answer to these questions will determine if the emergence of Ómicron turns out to be just a “storm in a glass of water” or if it is a significant threat to the global economy and the central bank’s adjustment plans.