GBP/JPY Price Analysis: Bears to Dominate amid Brexit, Treasuries
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- GBP/JPY stays negative near the 153.00 handle following strong JPY.
- Fed’s shrinking and shuffling pose a concern for the risk sentiment.
- The pound seems slightly under pressure amid Brexit concerns.
The GBP/JPY price analysis suggests bearish view as the price is wobbling around in a tight range with modest daily losses. The GBP/JPY is slipping around 153.00, down 0.40% the day before Tuesday’s London trade.
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A two-day downtrend in US Treasury yields, coupled with a bounce off the 100-DMA, pinned yesterday’s cross-currency pair. The latest quote is weighed down by a return to risk aversion and negative headlines about Brexit.
Market sentiment appears to be under pressure due to concerns about the shrinking US Federal Reserve System (FRS) and a recent Fed reshuffle. Concerns over UK threats to enact Article 16 also influence sentiment and relationships.
British Brexit Secretary David Frost said on Friday that there had been limited progress on key negotiations, and since then, Irish leaders have been discussing triggering Article 16. There is still no resolution to issues such as the sausage war between the EU and the UK. However, according to Sky News, Boris Johnson has received new warnings about the consequences of his actions.
By postponing the rate hike until 2021, the Bank of England (BOE) disappointed the markets. The Bank of England Governor Andrew Bailey’s speech today is an important catalyst in this regard.
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However, the negative implications of three months’ real wages and the need for more debt seem to weigh on the quote. Although Japan’s real wages fell in September for the first time in three months as inflation rose faster than the value of nominal wages, the government reported a sign of global cost inflation hitting Japanese households. In addition, Kyodo News reported that Japan is considering a stimulus package worth more than 30 trillion yen ($265 billion) to ease the pain of the COVID-19 pandemic. However, this plan will require new debt.
US 10-year Treasury yield fell 3.7 basis points (bp) to 1.46% amid these developments, while US equity futures and FTSE futures rose modestly.
Except for Bailey from the Bank of England, updates on Brexit and Fed emissions cuts will be additional catalysts for short-term GBP/JPY moves.
GBP/JPY price technical analysis: Key SMAs to support bears
The GP/JPY price remains well below the key moving averages on the 4-hour chart. The price is immediately capped by the 20-period SMA. The pair is consolidating in a tight range and awaits a catalyst to initiate a trendy move. The volume is showing no clue for any trend bias.
