GBP/JPY BEARS ATTACK 153.00 ON DOWNBEAT TREASURY YIELDS, BREXIT WOES

• GBP/JPY reverses the previous day’s rebound from one-month low.
• Fears of Article 16 activation looms amid ‘limited’ progress on Brexit talks.
• Japan may need fresh debt issue to back the stimulus need.
• Fed tapering tantrums, BOE-led disappointment looms ahead of BOE’s Governor Baily, Fed’s Chair Powell’s speech.

GBP/JPY stands on slippery ground near 153.00, down 0.40% intraday heading into Tuesday’s London open.

The cross-currency pair bounced off 100-DMA to snap a two-day downtrend the previous day amid consolidation in the US Treasury yields. Though, the return of the risk-off mood, as well as negative headlines concerning Brexit, weighs on the quote of late.

Among them, fears concerning the US Federal Reserve’s (Fed) tapering and anxiety over the Fed reshuffle seem to exert a great deal of pressure on the market sentiment recently. Also weighing on the mood, and the pair, is the uncertainty over US stimulus and fears of the UK’s threats to trigger Article 16.

UK Brexit Minister David Frost cited limited progress on the key talks during Friday and the Irish leaders have been talking about the Article 16 activation since then. “There is growing speculation the PM could soon trigger Article 16 as ongoing talks between the EU and UK continue to fail to resolve problems such as the ‘sausage war’. But Boris Johnson is being given fresh warnings about the impact of such action,” said Sky News.

On a different page, the Bank of England (BOE) disappointed markets by delaying the rate hike towards the 2021-end. The same highlights today’s speech from BOE Governor Andrew Bailey as the key catalyst.

Alternatively, chatters that Japan’s stimulus need call for more issue of debt and the first negative prints of the real wages in three months seem to weigh on the quote. “Japan’s real wages declined in September for the first time in three months as inflation picked up faster than growth in nominal pay, the government said, a sign of global cost-push inflation starting to affect Japanese households,” said Reuters. On the other hand, Kyodo News mentioned, “Japan is considering an economic stimulus package worth more than 30 trillion yen ($265 billion) aimed at easing the pain from the COVID-19 pandemic, a plan that would require issuing new debt.”

Amid these plays, US 10-year Treasury yields drop 3.7 basis points (bps) to 1.46% whereas the US stock futures and FTSE Futures print mild gains at the latest.

Moving on, updates concerning Brexit and Fed tapering will act as additional catalysts to determine short-term GBP/JPY moves, other than the speech from BOE’s Bailey.

TECHNICAL ANALYSIS

100-DMA restricts short-term downside around 152.65 ahead of 200-DMA level surrounding 152.00. However, bulls are likely to remain cautious before witnessing a clear break of the 155.75 resistance confluence, including 21-DMA and a 13-day-old descending trend line.