• GBP/JPY remains sidelined around fortnight low, despite refreshing intraday bottom.
• Pullback in Treasury yields, absence of major negatives allow bears to take a breather despite Brexit jitters.
• UK PM Johnson’s speech, risk catalysts are crucial for short-term directions.

GBP/JPY bears struggle to keep reins amid a sluggish Tokyo open on Tuesday. In doing so, the cross-currency pair takes rounds to the fortnight as the US Treasury yields retreat from a multi-month high.

After a stellar show of risk-aversion, global markets turn inactive during early Tuesday as the US bond yields search for fresh clues to extend the earlier flight to safety. Also likely to have triggered the corrective pullback are the mixed comments from the Fed policymakers and China’s sturdy plans to maintain a “zero covid” policy.

In doing so, the cross-currency pair pays a little heed to Brexit-negative headlines, as well as the latest fall in prices to refresh intraday low, mainly due to the market’s consolidation. That said, UK Foreign Secretary Liz Truss gave up on Brexit talks with the European Union (EU). The British diplomat is also cited by The Times to brace for dumping a major part of the NI protocol. “Officials working for Truss have drawn up draft legislation that would unilaterally remove the need for all checks on goods being sent from Britain for use in Northern Ireland, the report added,” said Reuters.

On a different page, Bank of England (BOE) external Monetary Policy Committee member Michael Saunders bolstered the rate-hike concerns by suggesting that a neutral rate might be in the 1.25%-2.5% range. The policymaker also added that the UK rates might need to go above neutral if inflation expectations go higher, which in turn seemed to have put a floor under the GBP/JPY prices of late.

Amid these plays, US Treasury yields drop seven basis points (bps) to 3.008%, after rising to the highest levels since November 2018, whereas S&P 500 Futures rise 0.10% by the press time.

Moving on, a light calendar and Brexit jitters may test the GBP/JPY traders. Though, the bearish impulsive is likely to remain present amid a broad risk-aversion wave. That said, UK PM Boris Johnson’s address to the House of Commons will be crucial to watch as well.

Technical analysis

Unless crossing a downward sloping trend line from late April, around 162.25, GBP/JPY bears keep reins. However, the 50-DMA and a six-week-old ascending support line, respectively near 160.00 and 159.85, appear strong supports to watch during the pair’s further declines.