GBP/JPY Price Prediction: Cable Gunning to Test Huge Daily Support

  • GBP took a heavy beating late on Tuesday, following the Cooper Brexit Amendment failing to pass.
  • There is once again high uncertainty for the UK, as Prime Minister May continues to face rejection from the EU on renegotiation.

Brexit Vote Results Disappoint GBP Bulls

GBP was hit hard across the board last night, after a vital vote on the ‘Cooper’ amendment failed to pass in the House of Commons. This amendment was aiming to block a hard Brexit, providing a safety net in case of a no-deal scenario. It would have provided a six-month extension to the Brexit date, however this was comfortably defeated, 321 versus 298 for.

The full amendments put forward included Corbyn, Blackford, Grieve, Cooper, Reeves and Brady. In terms of market participants, the key focal points were around the aforementioned Cooper amendment and Brady. In terms of Brady, this was passed last night. It is somewhat of a positive for the Prime Minister May, as it allows her to go back to Brussels and try to renegotiate the Irish backstop. This was one of the key factors behind her failing to have backing in the first place.

Keeping in mind the above, the EU heading into the voting yesterday made it crystal clear that there is no room for renegotiation. Post the passing of the Brady amendment, they reiterated that position. A spokesman for the European council’s president insisted Tusk would not permit any changes to the deal already agreed with the UK government. The EU had already decided themselves that they wouldn’t entertain any further wiggle room.

Technical Review – GBP/USD

GBP/USD daily chart.

GBP/USD is currently trading around a key daily support level – this can be seen at 1.3060. This comes after cable dropped from 1.3200 down to test this critical area. A breach of this would be very punishing, inviting a fresh wave of selling pressure. Further to the downside, eyes will be on a retest of the big psychological 1.3000 mark. Any failure to support the price here, then 1.2950-00 will come back into the picture. The price last traded down at these levels back on 23rd January.

Technical Review – GBP/JPY

GBP/JPY 4-hour chart.

Looking at GBP/JPY via the 4-hour chart view, the price looks vulnerable to further downside risks, both fundamentally and technically. Eyes are on the potential completion of a head and shoulders pattern formation. The key neckline support can be viewed at around 142.85-70 region. In terms of the left shoulder and head, both have formed, with the right shoulder heading towards the neckline. A break lower will likely see the price gunning down towards 140.75, 21-22 January low area.

Featured image courtesy of Shutterstock.

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.