GBP/JPY briefly dips under 150.00 level, as bears target test of key 148.50-149.50 region

• GBP/JPY dipped briefly under 150.00 on Tuesday, but has since recovered back to the mid-150.00s.
• The bears will now be targetting a test of the April-October lows in the 148.50-149.50 region.
• The pair continues to suffer amid heightened demand for safe haven assets as markets fret about Omicron-related uncertainties.

GBP/JPY continued to head lower on Tuesday, picking up where it left off with things last Friday after Monday’s flat session. The pair dipped under 151.00 during the Asia Pacific session as heightened demand for safe havens boosted the yen after comments from the CEO of Moderna triggered concerns about vaccine efficacy and triggered risk-off flows. The pair momentarily dipped under the key 150 level in earlier trade, but has since recovered back to around 150.30.

Since slipping under key support in the 152.50 area in the form of a string of recent lows and the 200DMA at the end of last week as Omicron fears first hit the market, GBP/JPY hasn’t looked back. The pair has now backed off over 5.0% from October’s highs above 158.00 and the bears now eye an imminent test of the April-October lows in the 148.50-149.50 area. However, with the pair’s Relative Strength Index fast approaching oversold territory at 32.00 (oversold is classified as under 30.00), this may be a tough area to crack in the coming days.

But markets remain very much driven by Omicron-related headlines. There is still a high degree of uncertainty regarding how well the variant will be able to evade vaccine-induced and natural immunity, as well as regarding its transmissibility and symptoms. The answer to these questions will determine whether the emergence of Omicron turns out to be just a “storm in a teacup” or whether it is a meaningful threat to the global economy and central bank tightening plans. As long as uncertainty remains elevated, GBP/JPY is likely to remain a sell on rallies.