• Improving risk sentiment undermines JPY’s safe-haven demand and extended some support.
• The short-covering bounce seemed rather unaffected by Tuesday’s mixed UK jobs data.
The GBP/JPY pair held on its positive tone through the mid-European session, albeit bulls seemed struggling to extend the momentum further beyond the 142.00 handle.
A slight improvement in the global risk sentiment dampened the Japanese Yen's relative safe-haven status and turned out to be one of the key factors prompting some short-covering bounce, especially after the recent slump of around 530-pips over the past two weeks or so.
Meanwhile, bulls seemed rather unimpressed by today's mixed UK employment details, with the lack of progress in the cross-party Brexit talks weighing on the British Pound and collaborating towards capping any meaningful up-move, at least for now.
In the latest Brexit development, reports suggested that the UK PM Theresa May will not sign for a permanent customs union - a key demand by the opposition Labour party in the long cross-party talks, and further dented hopes of a cross-party agreement/raised chances of a no-deal Brexit.
The news, so far, had a rather limited impact on the British Pound, with fading safe-haven demand turning out to be an exclusive driver of the pair's steady recovery from the lowest level since mid-Feb. However, it would be prudent to wait for a strong follow-through before confirming that the cross might have already bottomed out and positioning for any further near-term appreciating move.
Technical levels to watch
Any subsequent recovery is likely to confront some fresh supply near the 142.50-70 area, above which the cross is likely to surpass the 143.00 handle and aim towards testing its next major resistance near the 143.70-80 region. On the flip side, the 141.55-50 region now seems to protect the immediate downside, which if broken might pave the way for an extension of the near-term bearish trajectory towards testing the 141.00 round figure mark.
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