GBP/JPY dives to session lows, risks breaking below 151.00 mark
- GBP/JPY witnessed some aggressive selling and retreated over 100 pips from daily tops.
- Risks posed by the upcoming Scottish elections weighed heavily on the British pound.
- A generally softer risk tone benefitted the safe-haven JPY and added to the selling bias.
The GBP/JPY cross came under some intense selling pressure during the mid-European session and dived to fresh daily lows, around the 151.00 mark in the last hour.
The cross witnessed a dramatic intraday turnaround from the 152.00 round-figure mark and has now eroded a major part of the previous day's positive move. This marked the second day of a positive move in the previous three and dragged the GBP/JPY cross well within the striking distance of the lower end of a one-week-old trading range.
The risk posed by the upcoming Scottish elections overshadowed the optimism over the reopening of the UK economy and weighed on the British pound. Polls are pointing to a supermajority for pro-independence parties, which might intensify pressure on the UK PM Boris Johnson to allow a second independence referendum in Scotland.
Apart from this, a sharp pullback in the equity markets forced investors to take refuge in the traditional safe-haven Japanese yen. This was seen as another factor that exerted additional downward pressure on the GBP/JPY cross. The downside, however, remains limited as investors now seemed reluctant to place aggressive bets ahead of the BoE meeting on Thursday.
From a technical perspective, repeated failures to find acceptance above the 152.00 mark suggests that the recent bounce from the 149.00 mark might have run out of steam. Some follow-through weakness below the 151.00 mark will reaffirm the negative bias and set the stage for the resumption of the corrective pullback from three-year tops touched earlier this April.
Technical levels to watch