GBP/JPY eases from tops, still well bid just below 136.00 mark

• A combination of factors assisted the GBP/JPY to gain traction for the second straight session.
• Brexit optimism underpinned the pound; upbeat market mood weighed on the safe-haven JPY.
• Concerns over escalating geopolitical tensions in the Korean peninsula capped any strong gains.

The GBP/JPY cross retreated around 80 pips from daily swing highs, albeit has still managed to trade with modest gains around the 135.70 region.

The cross built on the previous day's strong intraday bounce of around 180 pips from two-week lows and gained some strong follow-through traction for the second straight session on Tuesday. The uptick was sponsored by a combination of supporting factors, though lacked any strong follow-through and struggled to find acceptance above the 136.00 round-figure mark.

The British pound remained well supported by easing concerns over a no-deal Brexit, especially after the UK and the European Union agreed to intensify post-Brexit talks. The UK Prime Minister Boris Johnson added to the optimism and said that an outline of a deal could be reached by the end of July.

Meanwhile, Tuesday's mixed UK employment details did little to provide any meaningful impetus. According to the report, the unemployment rate held steady at 3.9% during the three months to April as compared to rise to 4.5% anticipated. The positive reading was largely negated by higher-than-expected Claimant Count Change, which came in at 528.9K, and an upward revision of the previous month's reading to 1032.7K

On the other, hand, the upbeat market mood undermined demand for the safe-haven Japanese yen and remained supportive of the pair's strong positive move to an intraday high level of 136.35. However, reports that North Korean has blown up an inter-Korean liaison office in Kaesong raised fears about an escalation of tensions in the Korean peninsula. This, in turn, extended some support to the Japanese yen and kept a lid on any strong gains for the GBP/JPY cross.

As investors looked past Tuesday UK macro data/geopolitical developments, the cross now seems to have stabilized and looking to move back above the 136.00 round-figure mark. Some follow-through strength beyond the daily swing highs will set the stage for a further near-term appreciating move, possibly towards the very important 200-day SMA.

Technical levels to watch