- GBP/JPY witnessed a dramatic intraday turnaround from two-week tops on Tuesday.
- The sterling was weighed down by stronger USD and increasing fuel crisis in the UK.
- The risk-off impulse benefitted the safe-haven JPY and contributed to the selling bias.
The intraday selling around the sterling picked up pace in the last hour and dragged the GBP/JPY cross to fresh daily lows, around the 151.65 region.
The cross struggled to capitalize on its intraday positive move to two-week tops, instead witnessed a turnaround and has now retreated nearly 100 pips from levels just above mid-152.00s. The downfall was exclusively sponsored by the emergence of heavy selling around the British pound and the risk-off impulse in the markets.
A broad-based US dollar strength, along with signs of the fuel crisis in the United Kingdom turned out to be a key factor that acted as a headwind for the GBP. Fears that a driver shortage – that caused problems for a range of industries in the recent months – would hit fuel supply led to panic buying and long queues at many petrol stations.
Meanwhile, the intensifying energy crisis in Europe and China – amid soaring gas and oil prices – and persistent about China Evergrande Group’s unsolved debt crisis took its toll on the risk sentiment. This was evident from a weaker tone around the equity markets, which benefitted the Japanese yen’s relative safe-haven status against its British counterpart.
With the latest leg down, the GBP/JPY cross has now reversed a part of the previous day’s positive move. A subsequent slide below the 151.35-30 horizontal support will shift the near-term bias in favour of bearish traders. The next relevant support is pegged near the 151.00 mark, which if broken decisively should pave the way for further losses.