GBP/JPY pulls back from 4-month top amid fresh doubts over soft Brexit

• Brexit uncertainty questions the GBP/JPY pair’s surge to a multi-month high.
• UK-EU officials accept that a lot of work needs to be done to get a Brexit deal.
• Holiday in Japan, the absence of the UK data highlight Brexit headlines as a key catalyst.

Weekend headlines concerning the Brexit developments seem to weigh on the GBP/JPY pair’s run-up to highest levels since early-June as the pair pulls back to 136.85 by the press time of Asian morning on Monday.

Not only the United Kingdom’s (UK) Prime Minister Boris Johnson but the European Union’s (EU) executive also conveyed over the weekend that there remains a long way to go for a successful Brexit deal. Adding to the uncertainty were downbeat comments from the Democratic Unionist Party (DUP) leader Nigel Dodds. However, the EU’s readiness to allow bunker talks and a lack of resistance from Ireland are likely forces that limit the pair’s declines.

The Telegraph recently ran a story highlighting the EU’s push for more concessions despite the UK’s warnings that the deal won’t pass through the Parliament in that case.

Risk-tone cheer US-China trade deal after nearly two years of the tussle that challenged global markets.

While on-going Brexit talks between the EU and the UK officials will keep directing the GBP/JPY pair’s near-term moves, the absence of Japanese players and a lack of the UK data could restrict pair’s momentum.

Technical Analysis

The pair needs to close beyond the 200-day Exponential Moving Average (EMA) level of 137.30 in order to question June month high nearing 138.35, failure to do so can fetch the quote back to 135.75/65 area including highs marked on July 25 and September 20.