GBP/JPY fails to rebound from two-week low around 162.00 on Downing Street woes

• GBP/JPY extends downside break of two-month-old trend line, takes offers to refresh daily low.
• Key British diplomats including Health Secretary Sajid Javid, Finance Minister Rishi Sunak and Conservative Party Vice-Chair Bim Afolami resigned.
• 100-DMA, ascending support line from March lure sellers amid bearish MACD signals.

GBP/JPY takes offers to refresh intraday low around 161.70, down for the second consecutive day, during Wednesday’s Asian session. The cross-currency pair dropped the most in three weeks the previous day amid the UK’s political drama. Also weighing on the pair could be the broad risk-off mood on recession fears.

UK PM Boris Johnson had a tough Tuesday as senior members of his cabinet, as well as the Tory Party, resigned after he decided to keep former Conservative party whip Chris Pincher in his post after sexual misconduct allegations were made against him. The British Leader, however, regretted his decision and took steps but it was too late. Even so, UK PM Johnson remained determined to keep his post and form the new cabinet.

Among the key resignations were British Health Secretary Sajid Javid, Finance Minister Rishi Sunak and Vice-Chair of Conservative Party Bim Afolami. It’s worth noting that multiple politicians are standing in the line to leave the boat as it appears sinking.

It’s worth noting that Germany’s energy crisis, Italy’s drought and the Bank of England’s grim economic outlook are the key catalysts that drowned the GBP/JPY prices earlier, before the latest corrective pullback. On the same line could be hopes of an end to the British pessimism after the dissolution of the current cabinet, which is more likely soon.

Moving on, GBP/JPY traders should pay attention to the risk catalysts for fresh directions.

Technical analysis

GBP/JPY pair justifies the previous day’s pullback from the 165.00 resistance confluence, including the 21-DMA and a fortnight-old descending trend line.

Also keeping sellers hopeful is the pair’s successful break of the previous key support line from May 12, now resistance around 162.45.

Additionally, the bearish MACD signals and the absence of the oversold RSI conditions also keep GBP/JPY sellers hopeful of breaking the 100-DMA support, close to 160.85.

With this, the pair could aim for the four-month-old ascending support line, at 159.30 by the press time.

Should the quote remains bearish past 159.30, the odds of witnessing a slump to May’s low of 155.59 can’t be ruled out.

Alternatively, recovery moves may initially aim for the previous support line from May, near 162.45.

However, the GBP/JPY bulls remain pressured until they cross the aforementioned 165.00 key hurdle.

Following that, the quote could quickly rush towards the yearly peak of 168.73, marked in June.

GBP/JPY: Daily chart

Trend: Further downside expected