GBP/JPY spikes to fresh weekly tops, eyeing a move beyond 140.00 mark

• GBP/JPY gained strong traction and build on this week’s bounce from sub-138.00 levels.
• Renewed hopes for a last-minute Brexit deal provided a strong boost to the British pound.
• COVID-19 vaccine optimism undermined the safe-haven JPY and remained supportive.

The GBP/JPY cross jumped to fresh weekly tops during the early European session, with bulls now awaiting some follow-through buying beyond the key 140.00 psychological mark.

A combination of supporting factors assisted the cross to gain some strong positive traction on Wednesday and build on its solid rebound from sub-138.00 levels, or two-week lows touched on the first day of the week. Despite a deadlock in the post-Brexit trade negotiations, investors remain optimistic about the possibility of a last-minute agreement. This, in turn, was seen as one of the key factors lending some support to the British pound.

The buying interest picked up pace in the last hour after UK Cabinet minister, Michael Gove said that there can be scope for compromise on fisheries – one of the three key outstanding issues. This comes ahead of a key meeting between the UK Prime Minister Boris Johnson and the European Commission President Ursula von der Leyen later this Wednesday.

Apart from this, the upbeat market mood – supported by positive news on COVID-19 vaccine – undermined the safe-haven Japanese yen and remained supportive of the GBP/JPY pair’s strong move up. The global risk sentiment got a boost after the US FDA released documents that raised no new issues about the safety or efficacy of the Pfizer/BioNTech vaccine.

As investors await fresh Brexit updates, it will be interesting to see if the GBP/JPY cross is able to capitalize on the momentum or bulls opt to lighten their positions. This makes it prudent to wait for a sustained move beyond the 140.00 mark before positioning for a move back towards near three-month tops, around the 140.70 region touched on December 4.

Technical levels to watch