GBP/JPY bounces off lows, still in the red near mid-135.00s
- GBP/JPY witnessed some follow-through selling for the second straight session on Friday.
- The downbeat market mood benefitted the safe-haven JPY and exerted some pressure.
- Upbeat UK macro data extended some support to the sterling and helped limit losses.
- Concerns about no-deal Brexit might keep a lid on any runaway rally, at least for now.
The GBP/JPY cross maintained its offered tone through the mid-European session, albeit has managed to rebound around 50 pips from daily swing lows.
The cross extended this week's retracement slide from the highest level since June 10 and witnessed some follow-through selling for the second consecutive session on Friday. The downtick was led by a strong pickup in the demand for the safe-haven Japanese yen.
The recent escalation of diplomatic tensions between the world's two largest economies added to the coronavirus-induced economic uncertainty. This, in turn, took its toll on the global risk sentiment and forced investors to take refuge in traditional safe-haven assets.
Meanwhile, Friday's upbeat UK macro data extended some support to the British pound and assisted the GBP/JPY cross to find some support ahead of the key 135.00 psychological mark. However, concerns about a no-deal Brexit might keep a lid on any meaningful recovery.
It is worth reporting that the latest round of negotiations ended on Thursday without any significant progress on the post-Brexit trade deal. Both the UK and the EU said that talks remain at a stalemate and they were still some way off reaching an agreement.
Hence, any subsequent move up might still be seen as a selling opportunity. A convincing breakthrough the 1.3500 mark will add credence to the negative outlook and accelerate the slide back towards an important horizontal support near the 1.3450-40 region.
Technical levels to watch