GBP/JPY confined in a narrow range around 127.00 handle

The GBP/JPY cross is seen consolidating recent sharp declines and has been confined in a narrow trading band around 127.00 handle, despite of improving investor risk appetite.

Friday's release of surprisingly positive Chinese PPI, for the first time since January 2012, eased fears of a slowdown in the world's second largest economy and triggered a risk-on trade in the FX market. The cross, however, failed to benefit from an offered tone around the perceived safe-haven currency, Japanese Yen, as investors remained cautious over initiating fresh GBP bullish bets amid ongoing Brexit uncertainty.

Investors on Friday will focus on speeches from BOE's MPC Member Kristin Forbes and BOE Governor Mark Carney, along with the release of BOE's quarterly report on credit conditions and UK construction output data, which might provide fresh impetus for the British Pound and move the cross out of its current narrow trading band.

Technical levels to watch

Immediate upside resistance is pegged at 127.45-50 band above which the cross is likely to stage a recovery further towards 128.00 handle. A convincing move above 128.00 resistance might now pave way for continuation of the recovery trend beyond 129.00 round figure mark towards its next major resistance near 129.70-75 region in the near-term.

On the downside, a follow through selling pressure below 127.00 handle could drag the pair immediately towards 126.30-35 region below which the cross seems vulnerable to head back towards weekly lows support near 125.50-30 horizontal area.