GBP/JPY kneels as risk appetite changes; Hard-Brexit or Rough-Brexit?

PM Theresa May seems to experience life at a parallel universe where the foreign exchange market does not exist. The GBP/JPY, a high volatility currency cross, crashed almost (1.9%) from the 143.80 high to the session’s low, the 141.00 figure. Suddenly, all hopes for a further British Pound recovery are underwater due to lack of an adequate diplomacy in such relevant matter.

As short-sellers smelled pound weakness across the board during the European trading session, crosses tend to deep the most on high caliber news events or market statements that call for swift portfolio adjustments.

Key Quotes (Via Reuters)

"I'm tempted to say that the people who are getting it wrong are those who print things saying I'm talking about a hard Brexit, (that) it is absolutely inevitable there's a hard Brexit," she told the Charity Commission, a government department that regulates charities in England and Wales.

"I don't accept the terms hard and soft Brexit. What we're doing is (that we are) going to get an ambitious, good, best possible deal for the United Kingdom in terms of ... trading with and operating within the single European market."

"But we mustn't think of this as sort of leaving the EU and trying to keep bits of membership, what bits of membership will we keep," she said.

"It's a new relationship, we'll be outside the EU, we will have a new relationship but I believe that can be a relationship which has a good trading deal at its heart."

GBP/JPY Technical Levels

Valeria Bednarik, Chief Analyst at FX Street, highlighted: “The Pound plunged against all of its major rivals, after PM Theresa May said that the UK will definitively break with the EU, but still will seek for the "best possible deal" in terms of trade.”

The immediate support seems to clock around the 141.00 (round figure). Meanwhile, the 200 SMA salutes this region slowing down sellers. A dual Fibonacci view, medium and short-term, suggest further downside from a technical perspective. If prices close and open below the 141.00 handle, there is no reason to delayed a visit to 139.60 (short-term Fib 61.8%) and later, 136.90 (short-term Fib 50.0%). However, a deeper pullback does not equal a bearish trend. To the upside, once prices consolidate and build a robust bottom, the GBP/JPY can target 152.00 (long-term Fib 38.2%) and finally, 160.40 (long-term Fib 50.0%).

GBP/USD Forecast: break below 1.2088 points to a steeper decline