GBP/JPY off session peak, back below 131.00 handle

Having dropped to the lowest level since mid-August, the GBP/JPY cross managed to recover over 150-pips from session through and jumped beyond 131.00 handle.

The pair, however, has retraced few pips from session peak level of 131.22 and has now traced back below 131.00 handle to currently trade around 130.75-80 band. 

The prevalent risk-on sentiment, led by the outcome of first US presidential election debate that suggested Clinton’s win, is driving investors away from the perceived safety of the Japanese Yen and has been the sole contributor to the pair's recovery from the vicinity of a multi-year low touched in the aftermath of historic Brexit referendum. 

Meanwhile, concerns over European banking sector on the back of Deutsche Bank's performance might pose a serious risk to the prevalent risk-on sentiment and might attract fresh selling pressure around the cross. 

Technical levels to watch

On the downside, 130.00 psychological mark might protect immediate slide. Failure to hold this immediate support, and a subsequent drop below session low support near 129.65-60 band, is likely to accelerate the fall immediately towards mid-August lows support near 129.15 level before eventually dropping to retest post-Brexit swing low near 128.90-85 region.

Alternatively, sustained momentum back above 131.00 handle might now assist the cross to stage an additional recovery towards 131.60-65 horizontal resistance above which the cross seems all set to reclaim 133.00 handle.