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  • GBP/JPY witnessed some follow-through selling for the second straight session on Friday.
  • A pickup in the demand for the safe-haven JPY was seen exerting pressure on the cross.
  • Brexit anxieties kept the GBP bulls on the defensive and added to intraday selling bias.

The GBP/JPY cross remained depressed through the first half of the European session and was last seen trading near four-day lows, around the 138.65-70 region.

The cross extended the previous day’s retracement slide from two-week tops, around the 139.85 region, and witnessed some follow-through selling for the second consecutive session on Friday. Despite the optimism over a potential COVID-19 vaccine, a goodish pickup in demand for the safe-haven Japanese yen was seen as one of the key factors exerting pressure on the GBP/JPY cross.

On the other hand, Brexit anxieties held the GBP bulls from placing any aggressive bets and did little to lend any support to the GBP/JPY cross. In the latest Brexit-related developments, the EU’s chief Brexit negotiator, Michel Barnier reportedly briefed envoys on Friday and raised doubts about the possibility of a deal at this stage.

This comes on the back of a disagreement on key sticking points – the so-called level playing field, fisheries and state-aid rules. Adding to the uncertainty were comments by the European Commission Ursula van der Leyden, saying that the bloc was ready for the possibility of Britain leaving the EU without a new trade accord.

Michel Barnier will be travelling to London this evening for Brexit talks. With just five weeks left until the end of the transition period on December 31, the deadlock could prompt investors to unwind their bullish GBP positions and continue exerting some downward pressure on the GBP/JPY cross, though the downside is likely to remain limited.

Technical levels to watch

 

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