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GBP / JPY cuts a significant part of initial gains, remains stable around 136.65 area

The crossing GBP/JPY it fell around 30 pips from the daily highs, although it has still managed to maintain modest gains, around the 136.70-65 region.

The cross showed some resistance near the very important 200-day SMA and made a nice bounce from the 136.30 area. The rally was sponsored by the tone on the Japanese yen, although lingering Brexit-related uncertainties limited the rise of the GBP / JPY cross.

Despite the prevailing climate of risk aversion, the JPY struggled to attract safe haven inflows amid resurgent demand for US dollars. This, coupled with a modest intraday rally in the British pound, provided a modest rise to the GBP / JPY during the first half of Monday’s trading action.

Global risk sentiment took a hit on Monday amid mounting concerns that the continued rise in new coronavirus cases could hamper global economic growth. In addition to this, the uncertainty about the next round of US fiscal stimulus measures further affected investor sentiment.

On the other hand, GBP traders refrained from making aggressive directional bets and preferred to wait for further Brexit updates. It’s worth reporting that the UK and the EU resumed Brexit talks last week and were reported to have made some progress on state aid rules.

However, fishing remains a key stumbling block. British Prime Minister Boris Johnson has insisted on regaining control of his waters, while the EU wants access to fishing waters. This, in turn, appeared to be the only factor that kept the GBP / JPY’s intraday rally limited.

From a technical perspective, some subsequent selling below the 136.30 area (daily swing lows) will set the stage for an extension of the recent pullback from the 137.60-65 region. The GBP / JPY cross could accelerate the decline further to test the horizontal support at 135-.75.

Credits: Forex Street

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