GBP/JPY: Brexit optimism favors risk-on, 148.20 can become bull’s favorite
Tuesday, 12 March 2019
· *GBP/JPY is trading near 147.00 ahead of European open on Tuesday.*
· *Theresa May’s last-ditched efforts renewed risk-sentiment considering soft Brexit but parliament voting is still left pending.*
· *148.20 seems immediate resistance with 146.50 acting as nearby support*
GBP/JPY is flirting with 147.00 before London markets open on Tuesday. Prices rallied early-day on speculations that legal assurances from the EU on customs region and Irish backstop may help the PM May avoid another defeat at today’s parliament voting on her second Brexit deal. Traders may now await actual results of the voting for fresh impulse.
In spite of spending more than two-years to please the EU over an acceptable Brexit deal and witnessing humiliating defeat by the UK members of parliaments (MPs), the British Prime Minister Theresa May didn’t stop her last-ditched efforts to persuade regional leaders over the terms of departure. As a result, the EU Commission Chief Jean-Claude Juncker seemed to have impressed by her efforts as both Juncker and May announced positive results of Strasbourg meeting.
The European Union is expected to give legal assurance to Britain that once it accepts the customs union, it won’t be trapped in forever. Also, there were lose signals that the EU may also help get past the Irish backstop problem for which details can be known in today’s debate.
Although no specific time is announced, it's expected that British lawmakers can commence debating on the PM Theresa May’s second Brexit proposal sometime during the evening. They will then move forward to vote on whether to accept or reject the deal.
Should the deal gets reject, like it did in January, there are two options on the table. First, another voting on March 13 on whether to leave EU on March 29 without any deal or not, which if passed positively could give rise to final voting on March 14. At that time, the British politicians are expected to vote on whether to Article 50 (meaning requesting another date longer than March 29 to exit the EU from the regional authorities) or not.
While initial optimism surrounding the soft Brexit have helped the Pound, another defeat by the PM May could renew risk sentiments. However, follow-on voting on delayed Brexit could end up soothing the GBP buyers.
It should also be noted that recent communications from the Bank of Japan (BoJ) continue to favor the central bank’s loose monetary policy, which in turn could offer additional strength to the pair.
*GBP/JPY Technical Analysis*
An outside day bullish formation on the daily chart can propel the GBP/JPY pair to a descending trendline connecting September – November highs, near 148.20, if the quote closes beyond 146.50. However, its further upside can be capped by 148.50, 149.80 and 150.00.
Meanwhile, pair’s D1 close under 146.50 can revisit 200-day simple moving average figure of 144.80 with 145.40 acting as an intermediate halt.
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