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  • GBP/JPY stays near three-day high, above 21-day EMA.
  • Prices benefited from the UK Markit Services PMI, risk recovery.
  • The return of British MPs form Christmas holidays, trade/Brexit will be worth watching amid mostly empty economic calendar.

GBP/JPY takes the bids to 142.80 amid the Asian session on Tuesday. The pair holds onto recovery gains above 21-day SMA while also maintaining the U-turn from 50-day SMA. The upbeat reading of the UK Markit Services PMI and improvement in the market’s trade sentiment could be considered as reasons behind the latest pullback.

While the latest headlines are indicating mixed feelings concerning the US-Iran tussle, the global leaders including France, Germany, the UK and the United Nations (UN) have tried their best to placate Iran on Monday. The same, while comparing to the absence of any major new war threats, helped improve risk-tone the previous day.

Also contributing to the risk recovery are overall positive figures of the Markit Composite PMI as well news that the Chinese trade diplomats will travel the US for further trade negotiations and phase-one (hopefully).

Even so, Trump administration’s rejection of visa to the Iranian Foreign Minister and the latest news that the US forces are yet not leaving Iraq, against the investors’ earlier speculations, seem to keep the US-Iran war fear on the table. While portraying the same, the US 10-year treasury yields and S&P 500 Futures stay sluggish by the press time.

Elsewhere, the UK PM said, as per the Independent, that we will not lament the death of Qasem Soleimani, blaming him for “the deaths of thousands of innocent civilians and western personnel”. However, the Tory leader opposed US President Donald Trump’s signal to hit Iranian cultural spots.

Markets will now await the UK Members of Parliaments’ (MPs) return from Christmas break. The same will put forward the UK PM’s Brexit Bill again in the Commons on Tuesday.

In regards to the trade, the UK Express mentions that Prime Minister Boris Johnson said that the UK will negotiate a post-Brexit free trade deal with the US and EU at the same time as he promises to lead the country out of the bloc by the end of January.

While the economic calendar mostly silent except for Japan’s Jibun Bank Services PMI and Vehicle Sales numbers for December, traders will keep eyes on trade/political headlines for fresh impulse.

Technical Analysis

Unless providing a daily closing below 50-day EMA level of 141.30, prices can keep running towards 144.30 and mid-December low near 145.75.