GBP/JPY clings to modest gains, lacks follow-through beyond 200-DMA

The GBP/JPY cross jumped to fresh daily tops during the early European session, albeit lacked any follow-through and remained below the 137.00 mark.

The offered tone surrounding the safe-haven Japanese yen (JPY) assisted the GBP/JPY cross to regain positive traction on Wednesday. The cross recovered a major part of the previous day's shap intraday fall of around 150 pips from near one-month tops, though Brexit-related uncertainties kept a lid on any furtehr gains.

The market reaction to the US President Donald Trump's surprise decision to end negotiations with Democrats on economic stimulus package turned out to be short-lived. This was evident from a strong rebound in the equity markets, which, in turn, undermined demand for perceived safe-haven assets, including the JPY.

On the other hand, the British pound remained on the defensive in the wake of the overnight report, which indicated that the EU has no plans to offer concessions to the UK Prime Minister Boris Johnson before next week's Brexit deadline. Adding to this, Irish Foreign Minister Simon Coveney was out with some comments on Wednesday and said that the European Union (EU) Chief Brexit Negotiator Michel Barnier will not agree on intensified negotiations unless the UK moves its stance on state aid.

From a technical perspective, the GBP/JPY cross has been oscillating in a range over the past three days or so and struggled to find acceptance above the very important 200-day SMA. However, the emergence of some dip-buying at lower levels warrants some caution before placing any aggressive directional bets.

Technical levels to watch