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GBP/JPY trims modest intraday gains, holds above 163.00 amid JPY weakness

  • A combination of factors did not help GBP/JPY to capitalize on its modest intraday gains.
  • Brexit woes and less than rosy expectations from the Bank of England continued to act as a headwind for sterling.
  • Risk aversion benefited the yen, which is a safe haven, and capped the cross’s gains.

On Monday, the crossing GBP/JPY attracted some selling around 164.00 and seems to have stopped last week’s nice bounce from the important 200-day SMA support for the time being. Spot prices gave back much of the modest intraday gains and pulled back to the 163-70-163.75 zone during the first half of the European session.

The good result of the elections of the conservative coalition in power in Japan suggests that the ultralax monetary policy adopted by the Bank of Japan will not change. Indeed, Bank of Japan Governor Haruhiko Kuroda reiterated on Monday that the central bank remains ready to take further monetary easing if necessary. This, in turn, was seen as a key factor undermining the Japanese yen and providing a good boost to the GBP/JPY cross on the first day of a new week.

However, the prevailing risk-off environment, represented by a generally weaker tone in equity markets amid rising recession fears, helped limit losses in the safe-haven yen. Aside from this, expectations of the Bank of England taking a gradual approach to raising interest rates and the Brexit woes acted as a headwind for sterling. This, in turn, prevented the bulls from making aggressive bets and limited the GBP/JPY cross.

Investors also remain concerned that the British government’s controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union. This suggests that the path of least resistance for the GBP/JPY cross is to the downside. That said, a repeated bounce from a technically significant 200-day SMA warrants bear traders’ caution amid a wide divergence in the policy stance taken by the Bank of Japan and other major central banks.

Technical levels

GBP/JPY

Panorama
Last Price Today 164.15
Today’s Daily Change 0.47
Today’s Daily Change % 0.29
Today’s Daily Opening 163.68
Trends
20 Daily SMA 164.56
50 Daily SMA 162.85
100 Daily SMA 161.01
200 Daily SMA 157.63
levels
Previous Daily High 163.94
Previous Daily Minimum 161.82
Previous Maximum Weekly 165.28
Previous Weekly Minimum 160.4
Monthly Prior Maximum 168.74
Previous Monthly Minimum 160
Daily Fibonacci 38.2% 163.13
Daily Fibonacci 61.8% 162.63
Daily Pivot Point S1 162.36
Daily Pivot Point S2 161.03
Daily Pivot Point S3 160.24
Daily Pivot Point R1 164.48
Daily Pivot Point R2 165.27
Daily Pivot Point R3 166.59

Source: Fx Street

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