GBP/JPY clings to gains near daily tops, eyeing a move beyond 137.00 mark

• GBP/JPY gained strong traction on Monday in reaction to Gove’s optimistic remarks.
• The prevalent risk-on mood undermined the safe-haven JPY and remained supportive.
• Monday’s key focus will be on headlines coming out of the Barnier- Frost meeting.

The GBP/JPY cross refreshed daily tops during the early European session, with bulls now looking to build on the momentum beyond the 137.00 mark.

The cross caught some aggressive bids on the first day of a new trading week and build on the previous session's intraday bounce from two-week lows, around the 135.40 region. The British pound got a strong boost in reaction to optimistic comments by the UK's Brexit minister Michale Gove, saying that the door is "still ajar" for post-Brexit talks to continue with the European Union.

Gove's comments largely offset the UK Prime Minister (PM) Boris Johnson's remarks on Friday, saying that Britain needs to get ready for leaving the EU with no trade deal. This, in turn, prompted traders to unwind their bearish GBP bets. Meanwhile, Johnson's spokesman had said that talks with the EU were over unless there is a fundamental change of position from the EU.

Hence, the focus now shifts to a meeting between the EU's chief negotiator Michel Barnier and his UK counterpart, David Frost, later this Monday. The incoming Brexit-related headlines will continue to play a key role in driving the sentiment surrounding the sterling and infuse some intraday volatility around the GBP/JPY cross amid absent relevant market-moving economic data.

On the other hand, the prevalent risk-on mood – amid reviving hopes for additional US fiscal stimulus measures – undermined the Japanese yen's safe-haven demand and remained supportive of the bid tone surrounding the GBP/JPY cross. That said, bulls might still need to wait for some follow-through buying beyond the 137.20-30 supply zone before positioning for any further gains.

Technical levels to watch