GBP/JPY faces rejection near 138.00 mark, pares early modest gains
|- GBP/JPY cross gained some traction on Friday and snapped two days of losing streak.
- EU envoys were briefed that Brexit talks remain unresolved on three sticking points.
- The set-up favours bearish traders and supports prospects for additional weakness.
The GBP/JPY cross quickly retreated around 30-35 pips during the early European session, albeit lacked any strong follow-through selling. The cross was last seen trading with modest daily gains, around the 137.70-75 region.
Following an early dip to the 137.40-35 region, the cross managed to regain some positive traction and moved away from over one-week lows touched in the previous session. The uptick was supported by a mildly offered tone surrounding the safe-haven Japanese yen and got an additional boost following the release of stronger-than-expected UK monthly retail sales figures.
The GBP/JPY cross, however, struggled to capitalize on the move and faced rejection near the 138.00 mark in reaction to the latest Brexit-related headlines. The EU negotiating team reportedly briefed envoys of the bloc's 27 member states that Brexit talks remain unresolved on three main issues – level playing field, fisheries and state-aid rules.
This comes on the back of stalled in-person Brexit talks after a member of the EU’s Chief Negotiator Michel Barnier was tested positive for COVID-19 on Thursday and took its toll on the British pound. That said, the downside remains cushioned, at least for the time being, as investors seemed reluctant to place aggressive bets, rather preferred to wait for fresh Brexit updates before positioning for the GBP/JPY pair's next leg of a directional move.
From a technical perspective, the cross on Thursday confirmed a bearish break below a four-day-old trading range. Hence, the attempted recovery move might be seen as a selling opportunity and runs the risk of fizzling out quickly. Nevertheless, the GBP/JPY cross, for now, seems to have snapped two days of losing streak, though any meaningful upside seems elusive.
Technical levels to watch
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