- GBP/JPY reversed a modest weekly bearish gap and bounced from a trading range support.
- A strong recovery in the global risk sentiment undermined the JPY and remained supportive.
- A sustained break through one-week-old trading range needed to confirm near-term direction.
The GBP/JPY cross trimmed a part of its early strong gains and has now retreated around 70 pips from intraday swing highs, near mid-134.00s.
The cross attracted some dip-buying near the 132.50 region – the lower end of a multi-day-old trading range – and quickly reversed a modest weekly bearish gap opening, led by the weekend news of the UK Prime Minister Boris Johnson's hospitalization.
A sharp turnaround in the global risk sentiment, as depicted by strong gains in equity markets, undermined the Japanese yen's perceived safe-haven demand and turned out to be one of the key factors behind the pair's initial leg of the intraday positive move.
Meanwhile, comments by the UK Housing Secretary Robert Jenrick, saying that he heard that Johnson is doing well, helped soothe fears of any impending political complications and eventually provided an additional boost to the British pound.
The momentum seemed rather unaffected by the downward revision of the UK Construction PMI, which recorded the steeped decline since April 2009 and further illustrated the extent of economic fallout from the coronavirus pandemic.
The cross climbed to near one-week tops, albeit lacked any strong follow-through. The cross started losing momentum after the UK PM spokesman said that Johnson remains under observation in the hospital as symptoms have remained persistent.
Even from a technical perspective, the cross remains well within a broader trading range held over the past one week or so. Hence, it will be prudent to wait for a sustained break through in either direction before positioning for the pair's near-term trajectory.
Technical levels to watch
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