GBP/JPY touches multi-year low as Brexit concerns fuel safe haven play
James Chen, CMT June 13, 2016 8:30 PM
<p>GBP/JPY dropped to touch a new multi-year low below 150.00 on Monday, hitting a level not seen since August of 2013. As might have been expected in the run-up to next week’s EU referendum in the UK, this drop has been largely fueled by unease over the near-future prospects of the British pound if a Brexit vote (a UK decision to leave the European Union) prevails. Further driving the pressure on GBP/JPY has been a general boost for the safe haven Japanese yen, partly also due to market jitters ahead of the upcoming referendum.</p>
GBP/JPY dropped to touch a new multi-year low below 150.00 on Monday, hitting a level not seen since August of 2013. As might have been expected in the run-up to next week’s EU referendum in the UK, this drop has been largely fueled by unease over the near-future prospects of the British pound if a Brexit vote (a UK decision to leave the European Union) prevails. Further driving the pressure on GBP/JPY has been a general boost for the safe haven Japanese yen, partly also due to market jitters ahead of the upcoming referendum.
The very latest UK polls with respect to Brexit have shown the Leave camp ahead by a wider margin than previous polls have shown. Friday’s poll from The Independent saw a ten-point lead for those who favor leaving the EU, while Monday’s poll from The Guardian showed a slightly lower six-point lead, also for the Leave camp.
As noted, this heightened Brexit risk has placed increasing pressure on sterling recently while helping to boost traditional safe haven assets like gold and the Japanese yen. This combination of a weakened pound and surging yen has accelerated GBP/JPY’s fall towards and below the key 150.00 psychological level. This drop extends the currency pair’s long-term downtrend that has been in place for the past year.
While the directional bias for GBP/JPY in the aftermath of next week’s EU referendum will be largely dependent on the actual outcome of the vote, the currency pair could continue to fall in the run-up to the referendum as volatility and uncertainty continue to weigh heavily on the markets. In the event of further trading below 150.00, the next major downside targets are at the 147.50 and then 145.00 support levels.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.