GBP/JPY jumps to 3-week tops, bulls eyeing a move beyond 135.00 mark

• GBP/JPY gains strong positive traction on Tuesday and breaks through a three-day-old trading range.
• The JPY struggled to attract any safe-haven flows despite concerns about a surge in COVID-19 cases.
• A bout of short-covering provided a modest lift to the GBP and remained supportive of the move up.

The GBP/JPY cross added to its intraday gains and jumped to near three-week tops, closer to the key 135.00 psychological mark during the mid-European session.

The cross caught some fresh bids on Tuesday and finally seems to have confirmed a bullish breakthrough a three-day-old trading range. The momentum was supported by an offered tone surrounding the Japanese yen (JPY) and got an additional boost from a sudden pickup in demand for the British pound (GBP).

The JPY struggled to attract any safe-haven flows despite growing worries about the second wave of the coronavirus infections. This, in turn, fueled fears over renewed lockdown measures and dampened prospects for a V-shaped economic recovery. The market concerns were evident from a fresh leg down in the equity markets.

On the other hand, the GBP managed to regain traction on the back of some intraday short-covering and seemed rather unaffected by persistent Brexit uncertainties. Apart from this, the GBP/JPY pair’s strong positive move lacked any fundamental catalyst, warranting some caution before placing fresh bullish bets.

Moving ahead, Tuesday’s key focus will remain on the resumption of the post-Brexit talks between the UK and EU negotiating teams. The incoming Brexit-related headlines will play a key role in influencing the sentiment surrounding the sterling and produce some meaningful trading opportunities around the GBP/JPY cross.

Technical levels to watch