GBP is back under pressure once again today as the market reacts to news that Theresa May will formally request that the EU extend the Article 50 process by just three months.

News last week that parliament was backing an extension to the March 29th Brexit date was met with relief by investors. There were even reports earlier in the week that May could ask for as much as a two-year extension.

May Faces Internal Opposition

However, May’s own party reacted to these reports with swift criticism and opposition. Several back-benchers and pro-leave campaigners within the conservative party said that if the government agreed to enter an “indefinite” limbo with the EU, they would resign.

In the face of such internal division once again, UK news wires reported this morning that May will seek just a three-month extension. Given how little has been achieved in two years of Brexit negotiations, the reaction has been one of disappointment. Many feel that such an extension doesn’t allow any time for proper negotiations and simply moves the cliff edge risk of Brexit a little further down the road.

Juncker Sounds Off Over Article 50 Delay

While May is currently dealing with opposition within her party, it is her opposition in Europe with which she needs to be more concerned. President of the European Commission Jean-Claude Juncker has been highly vocal in his opposition to extending the Article 50 process. Speaking on German radio this week, Juncker told reporters that given the confusion around the current state of UK politics, the EU is unlikely to agree to an extension at this week’s summit. He stated that they will likely need to meet again next week to see if May can gain any backing from her parliament.

Juncker told reporters:

“Theresa May has neither in her cabinet nor in parliament agreement on anything…As long as we don’t know what Britain could say yes to, we can’t make a decision…So my assessment is that we won’t be able to reach a decision this week and will have to meet again next week.”

No-Deal Brexit Simply Postponed

Seeking only a short delay will definitely appease the eurosceptics within her May’s party. However, many across the political spectrum fear that this isn’t enough time to find a proper resolution to the issues which remain.

The Irish backstop, which has been the key sticking point throughout negotiations, has gone unsolved for two years now. Now, there is little to suggest that a further three months negotiations will do any good. All that seems to have happened is a simple postponement of a potential no-deal scenario, which remains a very real threat.

Technical Perspective

GBP/JPY is currently hemmed in against a very well-defined resistance zone around 148.80 – 149.70 where we’ve had a few big prior swing highs. While the bias is still for a break higher, if we do see some disappointment this week in the extension request being turned down, then we could very quickly see GBP/JPY retracing recent gains. The first level to watch will be between 143.70s and 144.80s. This, you can see, marks the middle of the range in GBP/JPY. Below there, the main level we will be watching is the 140 – 140.80 level which is major support. You can see this was the level which initially stemmed the sell-off in 2018. So, some clear levels to watch in this pair which will act as a strong barometer for the overall market reaction given the safe-haven nature of JPY and the direct impact on GBP.