GBP/JPY steadies below 144 after fluctuating wildly on Brexit headlines

Bloomberg claims that Germany could drop critical Brexit demands.
German government spokesman denies claims.
Markit Services PMI beats expectations in the final reading.

After spending the majority of the day in a relatively tight range near the 143 mark, the GBP/JPY pair gathered strength in the early NA session and gained nearly 200 pips in less than an hour to touch its highest level in a week at 144.95. However, the pair reversed its course later in the day and retraced the majority of its daily upside. As of writing, the pair was trading at 143.94, up 0.46%, or 66 pips, on the day.

Citing sources familiar with the matter, Bloomberg reported that the British and German governments decided to abandon key Brexit demands to make it easier to reach a Brexit deal. The GBP recorded sharp gains against its major rivals on the back of this development and the GBP/USD raise more than 100 pips while the EUR/GBP lost more than 50 pips. However, a spokesman for the German government refuted these claims as he said that Germany's position had not changed on Brexit and they had full trust in the EU's Chief Brexit negotiator Michel Barnier.

Earlier in the day, the data released by the IHS Markit showed that the business activity in the UK's service sector expanded at a faster-than-expected rate in August with the PMI improving to 54.3 from 53.5 and surpassing the analysts' estimate of 53.9.

There won't be any significant macroeconomic data releases from the UK or Japan on Wednesday and Brexit headlines are likely to continue to dominate the pair's price action.

Technical levels to consider

The initial resistance for the pair aligns at 144.45 (50-DMA) ahead of 115 (psychological level/daily high) and 145.55 (100-DMA). On the downside, supports could be seen at 143.45 (Aug. 31 low), 142.65 (daily low) and 142 (psychological level).

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