GBP/JPY climbs to fresh session tops, around 150.00 mark

• GBP/JPY looks to build on the previous day’s late rebound from multi-month lows.
• A positive risk tone undermined the safe-haven JPY and extended some support.
• COVID-19 jitter, Brexit woes acted as a headwind for the sterling and capped gains.

The GBP/JPY cross refreshed daily tops during the early European session, with bulls making a fresh attempt to conquer the key 150.00 psychological mark.

The cross attracted some fresh buying near the 149.30-25 area and is now looking to build on the overnight bounce from the 148.45 region, or the lowest level since early March. As investors assess the economic impact of the fast-spreading Delta variant of the coronavirus, a turnaround in the global risk sentiment undermined the safe-haven Japanese yen. This, in turn, was seen as a key factor that provided a modest lift to the GBP/JPY cross.

That said, a combination of factors continued acting as a headwind for the British pound and capped gains for the GBP/JPY cross. The impasse over the Northern Ireland Protocol of the Brexit deal has soured ties between the UK and the European Union in recent months. This, along with the resurgence of the COVID-19 infections in the UK held traders from placing any aggressive bullish bets around the cross, at least for the time being.

The UK's chief Brexit negotiator, David Frost, said on Monday that the protocol is not sustainable in its current form and all options remain on the table to solve the issue. Lord Frost is set to unveil the government's proposals for post-Brexit arrangements for Northern Ireland later this Wednesday. Moreover, COVID-19 cases are rising by more than 50,000 a day in the UK and hundreds of thousands of Britons are being asked to self-isolate for 10 days.

There isn't any major market-moving economic data due for release on Wednesday. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the GBP/JPY cross has bottomed out in the near term and positioning for any meaningful appreciating move. That said, developments surrounding the coronavirus saga and the broader market risk sentiment might still assist traders to grab some short-term opportunities.

Technical levels to watch