GBP/JPY rebounds from multi-week lows, moves back above 154.00

• GBP/JPY continued losing ground for the fourth consecutive session on Friday.
• Weaker US Retail Sales, Brexit/COVID-19 woes acted as a headwind for the GBP.
• Reviving demand for the safe-haven JPY further contributed to the selling bias.
• Oversold conditions on short-term charts helped bounce off multi-week lows.

The GBP/JPY cross recovered a major part of its early lost ground to five-week lows and was last seen trading with only modest losses, around the 153.20-25 region.

The cross added to the previous day's heavy losses and witnessed some follow-through selling on the last trading day of the week. This marked the fourth consecutive day of a negative move and was sponsored by a combination of factors.

Investors remain worried that the government's decision to delay the final stage of easing lockdown measures to July 19 could hinder the nascent economic recovery. The concerns were further fueled by Friday's weaker UK Retail Sales figures.

In fact, the headline Retail sales dropped 1.4% in May, while core sales (stripping the auto motor fuel) declined by 2.1%. This, along with concerns about the EU-UK collision over Norther Ireland protocol, acted as a headwind for the sterling.

Apart from this, a modest pickup in demand for the safe-haven Japanese yen exerted some additional pressure on the GBP/JPY cross. That said, oversold conditions on short-term charts helped limit the downside, rather prompted some intraday short-covering move.

The GBP/JPY cross has now recovered around 75 pips from the daily swing low level of 152.45, though any meaningful positive move still seems elusive. Investors might refrain from placing aggressive bets as the focus now shifts to the BoE meeting next week.

Even from a technical perspective, the overnight break below the 154.20-154.00 strong horizontal support favours bearish traders. Hence, it will be prudent to wait for some follow-through buying before confirming that the recent corrective fall has run its course.

Technical levels to watch