GBP/JPY explores levels sub-157.00 as the yen picks up

• The sterling retreats from 158.20 to test levels below 157.00.
• The yen appreciates on risk aversion.
• GBP/USD: Heading towards 163.91 while above 156.60 – Credit Suisse.

The British pound has given away all the ground taken over the last two days, against a stronger JPY, favored by a deteriorated market sentiment. The pair has pulled back from multi-year highs at 158.20 to test prices right below 157.00

The yen appreciates on risk aversion

The risk-sensitive sterling remains sold on Thursday, with the yen building up as the investors run to safe assets. With US corporate earnings failing to extend the positive mood witnessed on previous days, concerns about supply chain disruptions and the timing of the Fed’s monetary policy normalization have returned to the limelight.

US stock markets are trading mixed on Thursday. The Dow Jones and the S&P 500 indexes are 0.4% and 0.36% down respectively while the Nasdaq Index appreciates 0.38%. Disappointing quarterly earnings from the technological firm IBM have dampened sentiment and fuelling demand for the safe-haven yen.

On the macroeconomic docket, in absence of key releases in the UK and Japan, better than expected US weekly jobless claims and the strong US home sales figures have been offset by the downbeat Philadelphia Fed Manufacturing Survey, which has reactivated concerns about the economic impact of supply bottlenecks.

GBP/JPY: Heading to 163.91 while above 156.60 – Credit Suisse

From a technical perspective, the FX Analysis team at Credit Suisse maintains their positive bias while support at 156.60 holds: “With a major base already established in February 2021, we look for a move to next resistance at 159.80, then 163.91 (…) The broken 156.62/06 highs should now floor the market over the medium-term.”

Technical levels to watch