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  • GBP/JPY caught aggressive bids during the mid-European session and shot to one-month tops.
  • Optimism over a potential COVID-19 vaccine weighed heavily on the safe-haven Japanese yen.
  • Brexit-related uncertainties might hold bulls from placing fresh bets and cap gains for the cross.

The safe-haven Japanese yen witnessed some aggressive selling during the mid-European session and pushed the GBP/JPY cross beyond mid-137.00s, or near one-month tops in the last hour.

The Democratic candidate Joe Biden’s win in the nail-biting US presidential election helped eases some of the uncertainties and boosted investors’ confidence. The already upbeat market mood got an additional lift in reaction to the latest optimism over a potential vaccine for the highly contagious coronavirus disease.

In a promising development, pharmaceutical giant Pfizer announced this Monday that an early analysis trial suggested its vaccine was robustly effective in preventing COVID-19. The news triggered a sharp rise in the global equity markets and drove flows away from traditional safe-haven assets, including the Japanese yen.

Apart from this, the latest leg of a sudden spike over the past hour or so could further be attributed to some technical buying on a sustained move beyond mid-137.00s. Hence, it remains to be seen if the strong move up is backed by any genuine buying or turns out to be a stop-run amid persistent Brexit-related uncertainties.

It is worth reporting that British and EU negotiators are yet to find a compromise on key sticking points – the so-called level-playing field, fisheries and state-aid rules. Hence, traders might prefer to wait for fresh Brexit updates before confirming the next leg of a directional move for the GBP/JPY cross.

Technical levels to watch