GBP/JPY gives back Bremain-led gains at light speed

GBP/JPY continues to trade on a very heavy note, last exchanging hands circa 160.00, having re-tested its recently formed weekly low of 160.84, as Tokyo players show a strong buying interest on the Japanese Yen, with USD/JPY briefly breaking through 110.50.

Brexit fears back in vogue

As Kathy Lien, Co-Founder at BK Asset Management, notes: "The worst performing currency on Tuesday was sterling, with the sell-off driven by a new Brexit poll that found the vote tighter than previously reported. According to ORB, 51% of Britons polled favored leaving the European Union versus 46% who favored staying."

As Kathy adds: "The U.K.'s manufacturing PMI report is scheduled for release on Wednesday and we are looking for a rebound but Brexit headlines will continue to dominate sterling flows and will overshadow the report just like last month."

GBP/JPY outlook

The pair has printed a commanding bearish outside day, resulting on a what was a growing long-sided market to be caught upside down, leading to a cascade of stops with subsequent strong bearish momentum, for what ultimately was a more than 400 pips move south from Tuesday's Asian top at 163.90. Going forward, sellers will need to build value below 160.00 psychological level in order to set new bearish targets, with the immediate one being circa 159.00. On the upside, sellers seem to have show commitment to protect 160.50 now and keep applyign downward pressure to the pair. It is worth noting that the daily rise seen during lae May showed signs of compression, a classic pattern of a possible market top.