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  • Reviving safe-haven demand underpinned the JPY and exerted some pressure on GBP/JPY.
  • The pound gained some traction and provided a modest lift, though lacked follow-through.

The GBP/JPY cross traded with a mild negative bias through the mid-European session, around the 134.75 region, albeit has managed to hold above daily swing lows.

The cross failed to capitalize on its early uptick to levels just above the key 135.00 psychological mark, rather met with some fresh supply on the first day of a new trading week and moved away from four-week tops set last Thursday.

A fresh wave of the global risk-aversion trade – amid persistent worries over the economic fallout from the coronavirus pandemic – provided a goodish lift to the Japanese yen’s safe-haven demand and exerted some pressure.

The market concerns resurfaced after China reported the highest number of new daily cases in nearly six weeks. This fueled fears about the second round of COVID-19 outbreak and dented investors’ appetite for riskier assets.

Meanwhile, the British pound retained its positive mood and remained well supported by the fact that the UK Prime Minister Boris Johnson left the hospital on Sunday, one week after he was admitted for treatment of COVID-19.

A goodish intraday pickup in demand for the sterling extended some support and assisted the cross to gain some positive traction during the early part of the European trading session, though lacked any strong bullish conviction.

It will now be interesting to see if the cross can attract any dip-buying at lower levels or the current pullback marks the end of the recent strong recovery move from the 124.00 mark, or near 3-1/2 year lows set on March 18.

Technical levels to watch