GBP/JPY extends losses below 135.00 ahead of UK CPI

• GBP/JPY portrays another pullback from 100-day SMA while stepping back from a four-day top.
• Fears of the coronavirus (COVID-19) second wave weigh on the market’s risk despite the upbeat performance of the UK’s Dexamethasone.
• UK inflation data, virus updates remain in the spotlight.

GBP/JPY prints mild losses of 0.17% while declining to 134.72 amid the Asian session on Wednesday. In doing so, the pair portrays the two-day losing streak while extending the previous day’s pullback from 136.36, highest since last Thursday.

Although the UK manages to offer upbeat results of its second coronavirus (COVID-19) vaccine, the risks of the pandemic wave 2.0, emanating from China, the US and Japan, exert downside pressure on the pair. Beijing escalated lockdown restrictions whereas virus numbers from Japan and some of the US states rose off-late. It’s worth mentioning that the pair got burnt by downbeat British employment data the previous day.

Other than the virus updates, geopolitical tension in Korea as well as amid Indian and China, not to forget the cautious sentiment ahead of US-China diplomat meet in Hawaii, keep the risk-tone sentiment mildly heavy.

Having said that, the US 10-year Treasury yields snaps the previous two-day winning streak while declining to 0.743% by the press time. Further, stocks in Japan also print mild losses as we write.

Looking forward, UK’s Consumer Price Index (CPI) for May month becomes the key for the pair traders to watch. Forecasts suggest CPI YoY to soften from 0.8% prior to 0.5% whereas MoM figures are likely to have improved to 0.0% versus -0.2% previous readouts.

Following the British inflation data, risk catalysts and virus updates will occupy the driver’s seat for the pair and become worth watching.

Technical analysis

The pair’s repeated failures to cross 100-day SMA, break of monthly support line, portrays the pair’s weakness. As a result, sellers may gradually near the May 11 top around 133.20.