GBP/JPY set to revisit 8-month low as Italy is headed to new elections

• Italy’s news of new elections send markets in turmoil with robust demand for the safe-haven Yen. 
• GBP/JPY tanks to 8-month low and reached the 143.20 level, current low of the day.

Guppy strongly fell in the first part of the day and reached 143.20 low in early Europe, then the market had a strong 180-pip reversal up move and GBP/JPY is now trading at around 144.00 down 1.09% on Tuesday’s trading. 

The Japanese Yen is fuelled by the risk-averse trade as traders run to the safe-haven currency. The political situation in Italy sent the 10-year Italian bond yield up almost 90% in less than a month. 

The Italian President, Sergio Matarella rejected the eurosceptic Paolo Savona as finance minister. The Five Star Movement and the League have given up on forming a coalition as Paolo Savona was-all-or-nothing for the two anti-establishment parties.

As a result, Carlo Cottarelli, former International Monetary Fund (IMF) has been appointed as interim prime minister. "Speaking as an economist, in the past few days tensions on the financial markets have increased… Nonetheless, the Italian economy is still growing and the public accounts remain under control," said Cottarelli. 

Italy is now headed for a new round of elections and the news sent markets into a frenzy. Safe-haven Yen is up, Euro and Cable are down, the US and European stock indices are also plummeting.

Meanwhile, the 10-year Treasury yield has lost almost 10% since last week, also favoring the Yen. 

GBP/JPY 4-hour chart 

The trend is bearish as the market is trading below its 50, 100 and 200-period simple moving averages on the 4-hour time-frame. Support is seen in the 143.00 -143.20 area, handle and the current low of the day, followed by the 142.00 handle while to the upside, bulls will likely meet resistance at the 145.00 and 146.00 handle.