The GBPJPY pair was moving sharply lower on the day to test support after U.K. Prime Minister Boris Johnson stated that the country would walk away from Brexit talks on October 15th if no deal is agreed.
The threat is the latest twist in the hostile negotiations between London and Brussels and brings uncertainty back to the table in a time when both economies are looking for stability. The latest round of Brexit talks begin this week and a failure to see an agreement before the December deadline would see both countries revert to World Trade Organisation rules, which would see tariffs and other economic conditions applied to their relationship.
Next week will see Japanese lawmakers choosing the country’s next Prime Minister after Shinzo Abe’s recent departure. The Yen is strengthening as Abe’s former right-hand man Yoshihide Suga saw support last week to become the frontrunner. This removes insecurity over the country’s succession plans with Suga unlikely to differ much in strategy from his predecessor. Suga has previously stated his support for the “Abenomics” economic policies that Shinzo Abe fronted in an attempt to drag the Japanese economy out of a decades-long struggle with deflation.
Ahead of the leadership race, tomorrow sees the release of finalized GDP figures for the Japanese second quarter. Year-on-Year GDP is expected to show a decline of 15% for the Japanese economy. Other nations have seen a small miss on the same number with no real effect on currency rates, but traders will still watch with interest.
GBPJPY Technical Outlook
The GBPJPY pair is moving lower on the day and is testing the uptrend line from June 30th, which comes in around 140.00. A break of this level could open up a larger move to the 138.00 price range. The pair is trading in a channel that looks like a flag or pennant and this range will need to hold for the pound to return to an uptrend path.
GBPJPY Daily Chart