GBP/JPY fades UK GDP-led bullish spike to 128.40

Following the release of better-than-expected UK GDP print, the GBP/JPY cross caught fresh bids and jumped back above 128.00 handle to test its highest level since Oct. 10.

UK growth numbers released on Thursday came-in higher than consensus expectations to show a quarterly growth of 0.5% during the third quarter of 2016 but was down from 0.7% recorded in the previous quarter. Meanwhile, the annualized rate also recorded stronger growth at 2.3% as compared to consensus forecast and previous reading of 2.1%.

Stronger-than-expected UK GDP print lifted the British Pound across the board, lifting the GBP/JPY cross to test 20-day SMA for the first time since mid-September. The optimism, however, seemed short-lived and the cross quickly retraced around 40-pips from session peak level of 128.40 as investors remained worried over possibilities of 'hard Brexit', which has been undermining sterling since the early part of this month.

Meanwhile, persistent weakness in European equity market also seems to boost the Japanese Yen's safe-haven appeal and might have contributed towards restricting upbeat GDP-led appreciating move for the GBP/JPY cross.

Technical levels to watch

From current levels, 20-day SMA near 128.25-30 region remains immediate strong hurdle, which if conquered is likely to help the cross to stage additional recovery, even beyond 129.00 handle, towards its next major resistance near 129.50 region.

On the downside, 127.50 (session low) should protect immediate downslide, which if broken is likely to accelerate the slide to sub-127.00 support (near 126.85 area) ahead of 126.50 strong horizontal support.