GBP/JPY remains on the back-foot, just below 134.00 mark

The GBP/JPY cross managed to rebound around 20 pips from the early European session dip and now seems to have stabilized just below the 134.00 mark.

Following a brief consolidation through the early part of trading action on Friday, the cross witnessed some intraday selling and extended the previous day's retracement slide from two week tops. The downtick was sponsored by the emergence of some selling around the British pound, though lacked any strong follow-through amid the prevalent upbeat market mood.

The sterling was being weighed down persistent Brexit-related uncertainties and failed to attract any buying following a modest upward revision of the UK Services PMI print for June. It is worth reporting that the UK and EU negotiators failed to make any substantial breakthrough on a number of important issues. Moreover, a meeting scheduled this Friday was delayed for next week due to the divergences between the two parties. This, in turn, cast serious doubts about the possibility of reaching an agreement before the end of the transition period in December 2020 and undermined sentiment surrounding the pound.

Apart from this, growing worries about the second wave of coronavirus infections benefitted the Japanese yen's relative safe-haven status against its British counterpart. Investors remain concerned that the ever-increasing number of new coronavirus cases across the world could trigger renewed lockdown measures to control the spread and delay the global economic recovery. However, the optimism over a potential vaccine for the highly contagious coronavirus disease, coupled with the incoming positive economic data remained supportive of the upbeat market mood and helped limit any deeper losses for the GBP/JPY cross.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that this week's strong recovery move from sub-132.00 levels might have already run out of the steam and positioning for any further near-term depreciating move.

Technical levels to watch