GBP/JPY surrenders intraday gains, flirts with daily lows around 152.80-85

• GBP/JPY struggled to capitalize on its modest intraday positive move beyond the 153.00 mark.
• Brexit woes acted as a headwind for the British pound and kept a lid on any meaningful gains.
• The cautious market mood benefitted the safe-haven JPY and contributed to cap the upside.

The GBP/JPY cross surrendered modest intraday gains and was last seen hovering near the lower end of its daily trading range, around the 152.80-85 region.

The cross built on the previous session's modest recovery from over one-month lows, around the 152.35-30 area and gained some traction during the first half of the trading action on Monday. However, a combination of factors failed to assist bulls to capitalize on the move or find acceptance above the 153.00 round-figure mark.

The risk that the UK government could trigger Article 16 of the Northern Ireland Protocol acted as a headwind for the British pound. Apart from this, the prevalent cautious market mood underpinned the safe-haven Japanese yen and further collaborate to keep a lid on any meaningful upside for the GBP/JPY cross, at least for now.

Growing market acceptance that a faster rise in inflationary pressures could force major central banks to tighten monetary policy sooner than anticipated continued weighing on investors' sentiment. This helped offset the disappointing release of the GDP print from Japan and benefitted the traditional safe-haven assets, including the JPY.

The Preliminary estimate showed that Japan's economy contracted more than expected, by 0.8% in the three months through September and 3.0% on an annualized basis. This marked the first downturn in two quarters as a COVID-19 state of emergency snapped consumer spending and boosted expectations for Prime Minister Fumio Kishida’s stimulus package.

Nevertheless, the emergence of fresh selling at higher levels suggests that the recent corrective slide from multi-year tops is still far from being over. Sustained weakness back below the 100-day SMA, around the 152.70-65 region, will reaffirm the bearish bias and turn the GBP/JPY cross vulnerable to prolong the downward trajectory in the near term.

Technical levels to watch