GBP/JPY reverses sharply from 2-week highs

A rally of the yen and a sharp slide of the pound pushed GBP/JPY to the downside. The Japanese currency gained momentum from falling equity markets and rising US bonds while the pound dropped amid weak UK data. 

GBP/JPY was trading at 2-week highs above 149.30 but turned sharply to the downside after the release of the retail sales data. According to the report, sales fell 0.8% in September against forecasts of a 0.1% slide. The pair bottomed at 147.90, matching Wednesday’s low. In two hours, it erased yesterday’s strong gains. 

UK retail sales drop sharply in Sept, a big miss on expectations

During the US session, GBP/JPY rose to 148.60 but the recovery was short-lived and near the end of the day, it was hovering around 148.10, a hundred pips below Wednesday’s close. 

On Friday, European leaders will meet again in Brussels with Brexit among the main themes. From Japan, a major risk event is ahead: on Sunday, there will be general elections of members of the House of Representatives. A victory of PM Abe’s party is expected and polls show that it could secure more seats than what currently holds.   

Technical levels 

The pair continues to move within a consolidation range around 148.50. Today when it appeared to be ready for a breakout to the upside, it reversed sharply. Now GBP/JPY is close to the lower bound of the mentioned range. 

A consolidation significantly below 148.00 would expose the October low at 146.90. On the upside, the pound needs to confirm levels on top of 149.20/30 (horizontal resistance / 20-day moving average) to clear the way to more gains.