GBP/JPY drops to 3-month lows, below 140.00 mark

• GBP/JPY remains under some heavy selling pressure for the third straight day.
• The coronavirus-led slump in global equities benefitted the JPY’s safe-haven status.
• Fears of a no-deal Brexit undermined the GBP and did little to lend any support.

The GBP/JPY cross tumbled to three-month lows during the early European session, with bears now looking to extend the slide further below the key 140.00 psychological mark.

The cross extended its sharp pullback from YTD tops – set last Friday – and remained under some heavy selling pressure for the third consecutive session on Friday – also marking its fourth day of a steep decline in the previous four.

GBP/JPY weighed down by a combination of factors

Growing market concerns over the outbreak of the deadly coronavirus outside of China and its impact on the world economy deepened a weeklong global stock market rout, which continued benefitting the Japanese yen's perceived safe-haven status.

On the other hand, the British pound remained on the defensive amid uncertainty about the UK-EU future trade relationship, especially after the two sides released their respective guidelines for the post-Brexit negotiations, starting on Monday.

The EU's mandate published on Tuesday emphasized on the need for a 'level playing field' while the UK threatened to walk away from trade talks on WTO rules in June unless there is the "broad outline" of an agreement on trade.

Meanwhile, the overnight sustained break below 100-day SMA – for the first time since October 2019 – was seen as a key trigger for bearish traders and seemed to have prompted some follow-through selling on the last trading day of the week.

Hence, a subsequent fall, towards testing the 139.30-25 strong horizontal support held since mid-October, now looks a distinct possibility amid absent relevant market-moving economic data from the UK and persistent fears of a no-deal Brexit.

Technical levels to watch