- GBP / JPY witnessed an aggressive short hedging move on the first day of a new week.
- A combination of factors undermined the JPY, a safe haven.
- A weaker USD benefited the British pound and provided an additional boost to the cross.
The crossing GBP/JPY added to its strong intraday gains and rallied past 150.50 in the middle of the European session.
The cross witnessed an aggressive short-hedging move on the first day of a new trading week and has now recovered more than 150 pips from the nearly month-long lows hit on Friday. The British pound found some support in the current US dollar pullback from multi-month highs. This, coupled with an offered tone around the Japanese yen, provided a strong boost to the GBP / JPY cross.
The risk appetite boost, as shown by a generally positive tone in equity markets, weighed on the Japanese yen, which came under further pressure from the worsening COVID-19 situation in Japan. Indeed, Japan’s minister in charge of the coronavirus response, Nishimura Yasutoshi, suggested on Sunday that the government could introduce stricter measures to curb infections under current law.
The GBP / JPY cross has now recovered a significant part of its losses recorded during the last two trading sessions, although the upside is likely to remain limited. Concerns about the economic fallout from the Delta variant of the coronavirus could act as a tailwind for the JPY. This could prevent bull traders from placing aggressive bets and limit any further gains for the crossover.
Therefore, it will be prudent to wait for some subsequent buying before confirming that the GBP / JPY has bottomed out in the near term and positioning for an extension of the recovery momentum. From current levels, any further bullish movement could face stiff resistance near the 151.00 round level, which should now act as a key point for short-term traders.
Technical levels
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
