GBP/JPY struggles near multi-day lows, just above 139.00 mark

• A strong pickup in the JPY demand exerted pressure on GBP/JPY for the second straight day.
• The British pound struggled to gain any traction ahead of the next round of the Brexit talks.
• It will be prudent to wait for some follow-through selling before placing fresh bearish bets.

The GBP/JPY cross maintained its offered tone through the mid-European session and was last seen hovering near daily lows, just above the 139.00 round-figure mark.

Following a brief consolidation through the first half of the trading action on Monday, the cross met with some fresh supply and retreated further from near six-month tops, around the 140.20 region, set last Thursday. The second consecutive day of the negative move was sponsored by a strong pickup in demand for the Japanese yen.

The JPY showed some strength despite Monday’s downbeat Japanse GDP report, which showed that the world’s third-largest economy shrunk by the most on record during the second quarter of 2020. In fact, GDP contracted for the third straight quarter and plunged at an annualized rate of 27.8%, offering a bleak fundamental backdrop.

On the other hand, the British pound struggled to gain any meaningful traction and remained confined in a range, shrugging off an improvement in the sentiment over Brexit talks. Investors now seemed reluctant to place any aggressive bets ahead of the upcoming Brexit talks on the future UK-EU relationship, set to resume on August 18.

With the JPY price dynamics turning out to be an exclusive driver of the GBP/JPY pair’s momentum, the upbeat market mood could undermine the JPY’s safe-haven demand and help limit deeper losses. The global risk sentiment remained well supported by the latest optimism over a potential vaccine for the highly contagious coronavirus diseases.

There isn’t any major market-moving economic data due for release on Monday. This makes it prudent to wait for some strong follow-through selling before confirming that the GBP/JPY cross might have topped out in the near-term and positioning for any further near-term depreciating move.

Technical levels to watch