GBP/JPY clings to strong intraday gains above 139.00 mark

The buying interest around the British pound picked up pace during the early European session and pushed the GBP/JPY cross to two-day tops, around the 139.30 region.

The cross opened with a bullish gap on the first day of a new trading week after Britain and the European Union agreed to extend trade negotiations beyond Sunday's deadline. The decision raised hopes the UK and the EU will secure a free trade agreement before the end of Brexit transition period on December 31.

The EU's chief Brexit negotiator, Michel Barnier added to the optimism and said that the negotiators will give every chance to reach a post-Brexit trade deal. This, in turn, provided an additional lift to the already stronger pound. Barnier, however, reiterated that two sticking issues remain unresolved in talks.

Barnier further added that there has been limited progress in UK trade negotiations on enforcement mechanisms and disagreement on State Aid. This, coupled with the fact that the UK and the EU have repeatedly failed to narrow their differences on key issues, held the GBP bulls from placing aggressive bets.

Apart from this, the latest optimism about the rollout of COVID-19 vaccines undermined the Japanese yen's relative safe-haven status against its British counterpart and remained supportive of the positive move. That said, it will still be prudent to wait for some follow-through buying before positioning for any further appreciating move.

Technical levels to watch