GBP/JPY spikes to fresh session tops, lacks follow-through
|- Improving risk sentiment weigh on JPY and led to the initial recovery.
- The uptick gets a boost following the Tory leadership contest results.
- Boris Johnson remains a leading candidate and received 114 votes.
The GBP/JPY cross built on its steady intraday recovery from one-week lows and jumped to fresh session tops, around the 137.75 region in the last hour.
After an initial dip to the 137.00 neighbourhood, the cross managed to change course and the initial leg of bounce was supported by improving global risk sentiment. A turnaround in the European equity markets undermined the Japanese Yen's relative safe-haven status and helped the cross to bounce off lows.
The intraday recovery got an additional boost, rather picked up the pace after the results of the first ballot for Tory leadership contest showed that the leading candidate Boris Johnson received 114 votes, which makes it pretty sure that he will be a part of the final two standing in the race.
Despite the latest development, the fact that the UK might still crash out without a deal might keep a lid on any strong follow-through up-move, especially after the European Commission cleared its stance on Tuesday that there will be no Brexit renegotiation even with a new UK Prime Minister.
Hence, it would be prudent to wait for a sustained breakthrough weekly swing high resistance, near the 138.25-30 region, before traders start positioning for an extension of the pair's recent recovery from multi-month lows set earlier this June.
Technical levels to watch
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