GBP/JPY eases from tops, still well bid around 136.80-85 region

The buying interest around the British pound picked up pace during the early European session and pushed the GBP/JPY cross to the top end of its weekly range, around the 137.20 region.

Having found acceptance above the very important 200-day SMA, the cross traded with a positive bias for the fourth consecutive session on Wednesday. The intraday uptick got a strong lift following the EU chief Brexit negotiator, Michel Barnier's comments, saying that a Brexit agreement is within reach.

Barnier also showed readiness to discuss all subjects based on the legal text and raised prospects for the resumption of Brexit talks. It is worth recalling that the recent trade talks between the UK and the EU had stalled amid disagreements over fishing access and competition issues.

Separately, Maroš Šefčovič, the EU vice president of interinstitutional relations, said that there is no time to lose and the goal is still to reach a deal. This, in turn, prompted some aggressive short-covering move around the sterling and lifted the GBP/JPY cross back above the 137.00 mark.

Apart from this, the prevalent risk-on environment – amid optimism about additional US fiscal stimulus measures – undermined the safe-haven Japanese yen and remained supportive. However, Barnier's remarks that there will be no trade deal without a fair solution for fisheries capped gains.

This, coupled with the imposition of fresh lockdown measures to curb the second wave of the coronavirus infection in the UK, further collaborated towards capping gains. The GBP/JPY cross continued with its struggle to break through the 137.20-25 supply zone, warranting some caution for bullish traders and positioning for any further near-term appreciating move. 

Technical levels to watch