GBP/JPY building on yesterday’s smart recovery from over 2-month lows

The GBP/JPY cross continued gaining traction for the second consecutive day on Friday and was seen building on previous session's smart recovery from over 2-month lows.

On Thursday, the cross bottomed out near 139.30 area and staged a smart recovery, primarily led by some short-covering in absence of any negative surprise from the UK Q2 GDP revision. 

Adding to this, improving investors' sentiment, as depicted by positive trading sentiment around equity markets was further seen weighing on the Japanese Yen's safe-haven appeal and collaborated to the pair's recovery move from the lowest level since June 15.

The market seems to have largely ignored today's release of Japanese core CPI figures and the BOJ's move to trim the amount of debt purchases, with a combination of a follow through GBP recovery and risk-on environment continued driving the cross higher through European session on the last trading day of the week. 

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It, however, remains to be seen if the recovery is backed by some genuine buying interest or is solely led by short-covering amid weakening sentiment around the British Pound, on the back of a dovish BOE tilt and uncertainty around Brexit talks. 

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Technical levels to watch

From current levels, weekly highs, near the 141.00 handle, is likely to act as immediate resistance, above which the recovery move could further get extended towards 141.65-70 resistance en-route the 142.00 handle. 

On the flip side, the key 140.00 psychological mark now seems to protect the immediate downside, which if broken would turn the cross vulnerable to extend the fall towards 139.60-55 intermediate support before eventually dropping to the 139.00 round figure mark.