- The UK Supreme Court ruled that Johnson acted unlawfully when he suspended Parliament.
- The development further raised expectations of a softer Brexit and provided a goodish lift.
The GBP/JPY cross held on to its strong bid tone through the mid-European session, albeit has retreated around 20-25 pips from daily tops.
After the recent pullback from over two-month tops, a combination of supporting factors helped the cross to regain strong positive traction on Tuesday and snap two consecutive days of losing streak. The cross found some initial support from a weaker tone around the safe-haven Japanese Yen, which was weighed down by uncertainty over US-Japan trade deal and dismal manufacturing PMI print.
Brexit optimism boosts British Pound
Meanwhile, the British Pound picked up some extra pace across the board and provided a goodish lift to the cross after the UK Supreme Court ruled unanimously against the government, saying that the UK PM Boris Johnson acted unlawfully when he suspended the Parliament just weeks before Brexit and the prolonged prorogation was without reasonable justification.
This was followed by speaker of the lower house – John Bercowâ€™s announcement that he instructed authorities to prepare the resumption of business of the House of Commons and announced that the House will sit on Wednesday at 11:30 AM. This gives the UK lawmakers up to two weeks of extra time on hands to prevent a no-deal Brexit.
However, the fact that there are still big differences between the UK and the EU held investors from placing any aggressive bullish bets. The concerns were further fueled by earlier comments by the EU’s Chief Negotiator Michel Barnier, saying that there is no reason to be optimism about a possible solution to the Irish backstop issue.
Hence, it will be prudent to wait for a strong follow-through buying interest before traders start positioning for any further near-term appreciating move, possibly back towards reclaiming the key 135.00 psychological mark en-route the recent swing highs resistance near the 135.75 region.
Technical levels to watch