GBP/JPY slides to fresh daily low, back closer to mid-153.00s
- Reviving demand for the safe-haven JPY prompted fresh selling around GBP/JPY on Wednesday.
- Brexit-related uncertainties acted as a headwind for the GBP and contributed to the selling bias.
- The fundamental backdrop favours bearish traders and supports prospects for additional losses.
The GBP/JPY cross remained on the defensive through the early European session and dropped to a fresh intraday low, closer to mid-153.00s in the last hour.
The cross struggled to capitalize on the overnight goodish rebound of around 100 pips from the 153.25-20 area and met with a fresh supply on Wednesday. Concerns over the rising number of COVID-19 cases in Europe and the reimposition of lockdown measures continued weighing on investors' sentiment. This was evident from a softer tone around the equity markets, which drove some haven flows towards the Japanese yen and turned out to be a key factor that prompted fresh selling around the GBP/JPY cross.
On the other hand, the impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. A top German diplomat urged the UK to honour the Northern Ireland Protocol and warned that the dispute over the issue is not a game. Separately, French fishermen were reportedly planning to block British vessels' access to French ports in protest against Britain's refusal to grant them more licences to operate in UK territorial waters.
Meanwhile, the pair's inability to gain any meaningful traction suggests that an imminent interest rate hike by the Bank of England in December is fully priced in the markets. This, in turn, favours bearish traders and supports prospects for a further near-term depreciating move for the GBP/JPY cross. In the absence of any major market-moving economic releases, the broader market risk sentiment and Brexit-related headlines will be looked upon for some short-term trading opportunities.
Technical levels to watch