GBP/JPY touches a low of 142.61 on the day
Price is now leaning on support from the September lows @ 142.60 after buyers failed to firmly take out the support-turned-resistance level from the 28 June low @ 143.78 over the past two trading days. It's a bit of a double whammy for GBP/JPY today with the poorer risk sentiment helping to keep yen pairs anchored while the pound isn't looking too hot either as the Brexit saga hits a bit of a pause until the new year.
The latest on that front is that Theresa May is still working to win concessions from European leaders on the backstop. What she wants is legal and binding assurances that it won't be temporary but so far European leaders are only willing to give her clarification - not legally binding - that it will be temporary; up until a trade deal supersedes it that is. They are only assuring her that the trade deal will be drawn up as "quickly" as can be, but in truth we could see the EU and UK be stuck in an 'indefinite' limbo while working that out.
As for GBP/JPY, trading today will continue to hinge on risk sentiment for the most part so keep an eye out on how US equities perform later in the day. If equities continue to sour, a break below the 142.60 level will pave the way to retest support @ 141.26 once again before further support is only seen close to the 140.00 handle.
Right now, sellers remain in control as price has been seen to struggle in reaching a break above the 100-day MA (red line). The most recent tests towards the end of November were very much a precursor for a drop as we close out the year. Now that we are here, look towards support from the lows mentioned. Those will be key in determining whether or not the downside move here has more room to run or we'll see a bounce back to retest key resistance levels again.
As we approach the year end, liquidity in the market is going to be sapped out rather quickly once the FOMC meeting next week passes. Hence, expect movement in GBP/JPY to continue to be dominated by risk sentiment for the most part but also be on the watch out for potential Brexit headlines that can skew trading sentiment - even though European and UK lawmakers are set to head out for their Christmas break soon.
