GBP/JPY hovers around two-month top below 156.00 as Brexit, covid test bulls

• GBP/JPY struggles after three-day uptrend, near multi-day high.
• Supply crisis feared as new Brexit rules kick in, Ireland pushes for faster resolution of NI border talks.
• UK PM Johnson stays hopeful even as No10 pushes for contingency plans to battle Omicron.
• Holidays in Japan, the UK to restrict market moves, risk catalysts are the key.

GBP/JPY seesaws around 155.85 during the initial Asian session on Monday. The cross-currency pair pokes two-month high the previous day but a lackluster start to 2022 and fears emanating from Brexit, as well as the South African covid variant called Omicron, probes the bulls of late.

With the new post-Brexit border checks kicking in, trade bodies have warned of food shortages and a jump in prices looking forward, As per the new rules, the UK importers will have to present a full customs declaration versus up to the previous rule allowing 175 days of leeway. While identifying this, the British Frozen Food Federation said, per The Guardian that Britain’s small businesses should expect trade with the EU to be “permanently damaged” from 1 January.

On the same line is the Financial Times’ (FT) Brexit news quoting Irish Foreign Minister Simon Coveney. “Negotiations on the Northern Ireland Protocol need to reach a conclusion by the end of February,” said the news.

Not only the Brexit fears but a jump in the UK’s covid numbers also challenge the GBP/JPY bulls. As per the recent news from Reuters, “UK government seeks to mitigate workforce disruption from Omicron.” The news also mentioned, “The daily number of new COVID-19 infections across the United Kingdom rose to a record 189,846 on Friday, far higher than during previous peaks. However, hospitalizations and deaths have remained at much lower levels than in previous waves.” Even so, UK PM Boris Johnson was quoted saying that Britain is in a comparatively better position in battling COVID-19.

Elsewhere, Japan also registered a jump in the covid cases by refreshing a two-month high with the latest figures of 554 for Sunday, per Kyodo News.

It’s worth noting that off in Japan and the UK challenge the GBP/JPY traders while cautious optimism over the virus variant keeps the pair buyer hopeful, at least for the short-term. Also positive for the pair is the Bank of England’s (BOE) bullish bias versus the Bank of Japan’s (BOJ) preference for easy money.

Technical analysis

Unless dropping back below the mid-November tops surrounding 154.75, GBP/JPY remains on the buyer’s radar. However, tops marked during May and early November 2021, close to 156.00 becomes crucial for further upside.