GBP / JPY falls to one-week lows below 154.50

• A combination of factors dragged GBP / JPY to a week low.
• The risky mood benefited the yen, despite rising Treasury yields.
• Brexit / COVID-19 issues acted as a headwind for the British pound and contributed to the selling bias.

The GBP / JPY cross is trading negative in the European session and has just hit a one-week low below 154.50. The price fell to 154.29 and remains close to the daily floor, under pressure.

The cross loses ground for the third consecutive session on Thursday and has fallen more than 100 pips from the high of the week, around 155.50, which it reached on Tuesday. The Fed’s turnaround on Wednesday generated risk aversion, which benefited the Japanese yen.

On the other hand, sustained interest in US dollars was a factor behind sterling’s relative underperformance. Apart from this, concerns about the problems between the European Union and the United Kingdom over the Northern Ireland protocol and the decision of the United Kingdom government to delay the deadline for the final stage of the removal of the blocking measures, acted also as a headwind for the pound sterling.

In the latest Brexit-related developments, British Prime Minister Boris Johnson said on Wednesday that they will have to take action to ensure that post-Brexit trade between Britain and Northern Ireland is uninterrupted. In the absence of economic impact reports to move the market, GBP / JPY remains at the mercy of overall market risk sentiment.

However, the fundamental backdrop supports prospects for the resumption of the recent GBP / JPY corrective pullback from the multi-year peak around 156.00 set in May. Therefore, a further decline towards the 154.00 area, or monthly lows, remains a clear possibility.

Technical levels