GBP/JPY consolidates losses below 133.00 after hitting three-week lows at 132.40
- GBP/USD biased to the downside attempts to breach one-week lows at 1.2437.
- Risk aversion and an expected COVID-19 lockdown extension are hurting the pound.
- The US dollar appreciates as investors look for safety in times of uncertainty.
The pound has accelerated its downtrend against the Japanese yen after breaking the support area at 133.50 to post a fresh June's low at 132.40. GBP/JPY spiked up following the BoE’s monetary policy statement but the pair lost steam at 134.25 area to plunge beyond 1% through the day and consolidate in the upper range of 132.00.
The yen remains bid on a risk-off market
The Bank of England’s monetary policy statement gave some respite to the GBP earlier today. The BoE maintained the Bank rate unchanged at 0.1% and expanded the target of its bonds purchasing program by £100 billion. The fact that the increase has been lower than expected plus the absence of references to negative rates offered a fresh push to the pound to return near session highs.
Pound strength, however, as short-lived and the pair soon resumed its decline, hit by the negative market sentiment. Investor’s fears of a second COVID-19 wave on the back of the recent increase in contagions in the US and Beijing’s travel restrictions to stem a new virus outbreak, combined with geopolitical tensions between China and India have crushed market sentiment, boosting demand for the safe-haven yen.
GBP/JPY bearish momentum accelerates below 133.50
Sterling’s move below the 50-day SMA at 133.50 has added bearish pressure sending the pair to find support at 132.40. Below here, the next potential support levels would be at 131.60 (May 27 low) and 130.65 (May 22 low). On the upside, a bullish reaction should regain the 133.50 level (50-day SMA, to extend towards 134.30 (intra-day levels) and then the 100-day SMA at 135.35.
GBP/JPY key levels to watch