GBP/JPY slides below 138

GBP/JPY slides below 138.50 weighed by a vulnerable pound

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  • GBP/JPY’s reversal from  140.00 area extends to 138.35.
  • Brexit uncertainty and Scotland’s referendum hurt the pound.
  • GBP/JPY eroding trendline support at 138.40.

The sterling is trading lower against the Japanese yen for the second consecutive day, giving away most of the ground taken earlier this week. Pound’s reversal from intra-week highs right below 140.00 has extended on Friday to 138.35 lows so far.

Pound dives on Brexit and Scottish referendum woes

The pound has dropped against its main rivals on Friday, weighed by the ongoing uncertainty about the Brexit negotiations and talk about a new Scotland’s independence referendum

The standstill in the Brexit trade talks continues with only five weeks left to clinch a deal to avoid an unorderly exit from the EU. The comments from some negotiators, warning that differences in key issues like the fishing rights keep blocking the agreement, have dampened investors’ confidence on a deal.

Beyond that, Nicola Sturgeon, the leader of the Scottish National Party, affirmed today that she wants to celebrate a second independence referendum in the earlier part” of the next parliamentary term, which begins next year. This has added negative pressure on the pound.

GBP/JPY: Testing trendline support at 138.40

At the moment, the pair is testing support on the upward trending support line from October 30 lows, now at 138.40. Below here, the 138.00 psychological level and 137.20 (November 19 low) would come into focus. On the upside, immediate resistance lies at 139.10/20 (intra-day highs) and above here, 139.85 (November 25, 26 highs) and 140.00 round level.

Credit: FX Street

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