GBP/JPY recovery gains momentum, inching closer to 134.00 handle

A tepid recovery in sterling accompanied with a broadly weaker Yen helped the GBP/JPY cross to extend its recovery from a 3-week low touched on Friday.

After dropping to its lowest level since July 11, the cross traded higher for second straight day and is now comfortably trading above 133.00 handle. 

The prevalent risk-on sentiment is driving investors away from the traditional safe-haven currency, Japanese Yen, and is providing an additional boost to the pair's recovery momentum. The Japanese currency has failed to extract any benefit from rising current account balance data for the month of June, released earlier during Asian trading session.

Adding to this, a short-covering bounce in the GBP/USD major provided an additional support for Monday's up-move witnessed in the GBP/JPY cross.

Going forward, risk sentiment surrounding equity markets and news / developments surrounding further BOE monetary easing would be the key drivers for the pair's momentum in the near-term.

Technical levels to watch

The pair's rebound from near-term oversold conditions now seems to confront immediate resistance near 134.00 round figure mark, above which the recovery momentum could get extended towards a short-term descending trend-channel resistance near 135.00 psychological mark.

On the flip side, 133.35-30 zone now seems to act as immediate support, below which the pair could immediately drop to 132.90-85 intermediate support. A sustained weakness back below 133.00 handle would confirm resumption of the pair's near-term downward trajectory and force the pair back towards retesting a strong support near 132.00 round figure mark.