The Japanese cross pair GBP/JPY is trading sharply bearish amid weaker GBP and firmer JPY. The safe-haven pair has already violated upward trendline support 139.490, and now the same level is working as a resistance. The GBP/JPY may gain support and bounce off soon.
The GBP/JPY currency pair extended its previous session, losing streak, and dropped further below 139.078 marks, mainly due weakness in the GBP. The upbeat market sentiment, backed by the optimism over a potential vaccine for the highly infectious coronavirus, undermined the safe-haven Japanese yen and helped currency pair to limit its deeper losses.
In the meantime, the downbeat preliminary readings of Japan’s second quarter (Q2) Gross Domestic Product (GDP) also undermined the safe-haven Japanese yen currency and became one of the major factors that capped further downside for the currency pair.
Despite concerns about the ever-increasing coronavirus cases across the world and worsening US-China relations, the investors continued to cheer the optimism over a potential vaccine for the highly contagious coronavirus disease. Also, supporting factors could be the suspension of the US-China online meeting regarding the trade deal. It is worth mentioning that the meeting was initially scheduled for Saturday while the delay leaves the phase one deal intact, for the time being at least.
On the contrary, the fears of growing COVID-19 cases in the U.S., Australia, Japan, and some of the notable Asian nations like India continually fueled doubts about economic recovery. As per the latest report, France recorded more than 3,000 new cases for the second day while Australia’s state Victoria marked the highest death loss, which resulted in an extended state of emergency until September 13. As well as, Singapore also reported 86 cases on the weekend. At the same time, New Zealand imposed fresh lockdowns after recording increased cases of Covid-19. However, these gloomy updates kept challenging the market risk-on tone, which might weaken the safe-haven JPY and help limit losses for the major.
Apart from the virus woes, the long-lasting tussle between the world’s two largest economies remained on the cards as China’s ambassador to the U.S. recently gave warning against the U.S. move to send ships to the South China Sea, which could raise further tensions between both nations and harm the trade deal. Whereas, President Trump announced yesterday that TikTok should give its U.S. operations to another company within one-month, or it will be banned in the U.S. due to significant security threats. In return, China’s Foreign Ministry recently said on the day that it would firmly oppose to U.S. actions.
Technically, the GBP/JPY pair was gaining support at 138.950 level, and I was suspecting if the pair will be able to hit our take profit. Therefore, we decided to close our forex trading signal beforehand at 139.002, securing 34.7 pips as we opened it at 139.348. For now, the pair is staying at 139.07 level, and closing of candles above 138.925 is supporting selling bias in the pair. Good luck!