GBP/JPY surges through 138.00 handle

The GBP/JPY cross rallied in tandem with a sharp recovery in the British Pound and surged through 138.00 handle to hit its highest level since early Sept.

Currently trading just above 138.00 mark, the cross touched a session peak level of 138.65 amid a sharp short-covering bounce staged by the GBP/USD major. Adding to this, slight improvement in investors' risk appetite, as depicted by positive trading in European equity markets, dented the Japanese Yen's safe-haven appeal and provided an additional boost to the cross.

Meanwhile, an offered tone around the USD/JPY major restricted further upside and the cross quickly retraced over 50-pips from session peak. 

In absence of any fresh economic developments / major market-moving release, the current up-surge could be attributed to short-covering that helped the cross to trade in positive territory for 12th session in the previous thirteen. 

From technical perspective, near-term overbought conditions might limit further up-move and the cross is more likely to either consolidate its recent gains or witness a corrective slide following its recent rally of nearly 1200-pips from post-US presidential swing low of 126.70.

Technical levels to watch

From current levels, 138.60-65 area now becomes immediate resistance, which if cleared decisively opens room for continuation of the pair's near-term upward trajectory initially towards 139.50 intermediate resistance and eventually towards 141.00 mark strong resistance. On the downside, weakness back below 137.50 immediate support might now drag the pair below 137.00 handle towards retesting session low support near 136.30-25 region.