GBP/JPY drops to 131.00 neighborhood on profit-taking

Having posted a session high at 132.00 level, the GBP/JPY cross turned negative and has now dropped to session low to currently trade just above 131.00 handle.

A broad based recovery in the US Dollar triggered a profit-taking move in the GBP/USD major after yesterday’s up-move led by impressive UK monthly retail sales data. 

Adding to this, sustained weakness in equity markets is driving investors to the perceived safety of the Japanese Yen and exerting some selling pressure around the GBP/JPY cross.

No fundamental reason could be attributed to the pair's slide and is solely driven by the prevalent risk-off sentiment. However, given that the cross has confirmed a break-out through a short-term descending channel, today's fall could be on the back of profit-taking by short-term traders. 

Technical levels to watch

On a sustained weakness back below 131.00 handle, the pair is likely to immediately drop towards 130.65-60 horizontal support. A follow through selling pressure seems to drag the cross back towards retesting 130.00 psychological mark, which if broken might negate the break-out and turn the pair vulnerable to resume its near-term downward trajectory and head towards post-Brexit swing lows support near 129.00-128.80 region.

Meanwhile on the upside, a sustained strength above 132.00 handle would reaffirm the descending channel break-out and should assist the pair to surpass 132.50 intermediate resistance, towards testing its next major resistance near 133.75-80 region.