GBP/JPY drops back to 155.50 amid cautious sentiment
- GBP/JPY snaps two-day recovery amid a quiet session in Asia.
- Strong US Treasury yields, pre-NFP trading lull and a light calendar restrict market moves.
- Brexit, covid may offer intermediate action but nothing major than the US employment showdown.
GBP/JPY pauses after a two-day uptrend, refreshing intraday low near 155.45, amid Friday’s Asian session. The risk barometer pair justifies the cautious mood of the market players ahead of the key US employment report for May. Also important is the two-day G7 Finance Ministers’ first face-to-face meeting in London, starting today, which in turn adds to the risk-off mood.
Market sentiment worsened the previous day amid heavy calls of tapering from the US Federal Reserve. Also on the same line were talks surrounding the Brexit and tax hike proposal by US President Joe Biden. Furthermore, the fears of the Indian covid strain join the line of catalysts calling risk aversion.
US Fed’s gradually dialing back of the support program used during the pandemic, namely the portfolio sales, joined strong early signals of jobs and inflation data to propel the odds of tapering the previous day. The mood put a safe-haven bid under the US dollar and the Treasury yields, which in turn probes GBP/JPY buyers.
On the same line were US President Biden’s push for global tax for big corporations as the European Union and the UK insist increased tax revenue is paid where the businesses operate, not just where they declare profits, per Reuters.
Furthermore, the news that states Indian variant now dominant in the UK as cases up 79%, from the Independent, joins the fresh UK-France tussles over the fisheries to weigh on the market sentiment and the GBP/JPY prices.
On the positive side were talking about further stimulus from Japan as well as the BOE’s push for monetary policy adjustments.
Amid these plays, S&P 500 Futures track Wall Street’s losses whereas the US 10-year Treasury yield seesaw near 1.62% after the heaviest jump in three weeks, marked the previous day.
Moving on, Brexit and covid headlines may entertain GBP/JPY traders, coupled with the updates from London’s G7 Financial Ministers’ meeting. However, major attention will be given to US jobs reports and tapering woes, which in turn suggests further downside for the cross-currency pair.
Technical analysis
Failures to cross the weekly resistance line near 155.75 favor pullback to the monthly trend line support, close to 155.00, followed by the recent swing low and mid-May high around 154.85-80.