GBP/JPY was one of the worst-performing G10 pairs on Thursday amid a mixture of Pound weakness and Yen strength.
The pair crashed on Thursday, descending over 150 pips or 1.3%, a move which took the pair below the round 138.00 level from morning highs just before of the 139.50 mark.
Starting with the Pound, a combination of further confirmation of a deadlock in Brexit negotiations, poor economic data (September GDP and industrial production data missed expectations on Thursday morning) and also concerns regarding the relations between the UK and another of its major trade partners, China, all seemed to contribute to the GBP weakness.
Also, UK has had record number of new Covid-19 cases mounting to more than 33 thousand and more than 500 deaths. The situation in the Japan region on the other hand looks manageable for now.
The Yen has strengthened this week with emphasis on optimism in wake of Monday’s vaccine news and trader’s returning their focus to the worsening state of the Covid-19 pandemic in the US. However, Japan’s pandemic crisis worsens as well reigniting a debate over tougher virus laws and measures.
The pace of the sell-off in the pair, is considered to continue further but at a slower pace, given that there are further significant levels of support, at 137.39, 136.35 and the 50% Fibonacci retracement level from the late October low (at 134.40) to the November high, which sits 137.36.
On the upside, the October high is offering GBP/JPY strong resistance at 137.85, 137.68 and further at 140.30.
Looking forward, the pound will still face Brexit uncertainty and economic woes due to the four-week lockdown ending on the 2nd of December. The Japanese Yen will keep to be driven more by market shifts in safe haven demand. If global covid-19 fears worsen or if Brexit fears worsen, the safe haven Yen is more likely to strengthen.
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