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GBP/JPY climbs to session high as sterling stays bid


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GBP/JPY touches a high of 149.13 on the session


ForexLive

As the Brexit deal optimism continues to drag on, it’s helping to keep the pound bid on the day as we’re seeing cable move back higher on the day and at the same time GBP/JPY is starting to make a move higher as well.
The near-term bias in the pair remains more bullish since overnight trading and today price action continues to be underpinned by further optimism of a Brexit deal being in the works. From the hourly chart, price is moving back towards a test of the month’s high at around 149.50 should it hold a break of the 149.00 handle.

But the key test remains that price needs to find a daily break of the resistance seen from the July high at 149.31. So far, that has been what is stalling the upside in the pair since the end of September.
Price bias is working in favour of buyers on the charts as it holds above the two key hourly and daily moving averages. But there must be further conviction to break that daily resistance at 149.31 before a test of the 150.00 handle can be seen.
The current rhetoric ahead of next week’s EU meeting appears to be that of Brexit optimism. Both the EU and UK would want to hint at progress ahead of the meeting between European leaders on 17-18 October and that will likely be the case as they look towards making a deal by the end of November. That means that the pound will stay underpinned with regards to negotiations between the UK and EU – even if no substantial progress is made, the very facade of it will do for pound buyers.
The key risk lies domestically for the UK and if Theresa May can win over parliament votes for her proposals on Brexit. The latest news is that there’s about 30 Labour party members who will be defying Jeremy Corbyn to vote in favour of Chequers. But that only serves to offset the amount of May’s own party members who is likely to vote against her anyway. That’s the more tricky part of the equation.
For GBP/JPY though, trading the pair would require focusing on risk sentiment as well. Today, risk is a little bit better despite a softer touch earlier in the day. There isn’t a full blown risk off sentiment in markets as Treasury yields are managing to stick around current levels for the past few days as equity investors adjust to the higher yields. The prospects of an upbeat earnings season should also help with risk sentiment but let’s see how things develop over the next few days.
However, the number one driver for any pound pair remains that of Brexit. There’s just no other way around it. Further optimism will only serve to fuel further bids in sterling and with the chart supporting an upside move, watch out for a break in GBP/JPY to come once the 150.00 handle gives way. The next key resistance level beyond that will be the broken upwards trendline which sits near 151.70 at the moment.

But hey, at least if Brexit goes badly, pound buyers and Theresa May can blame Jose Mourinho:

Skip to 5:35 for the comment on Brexit

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