• GBP/JPY regained positive traction on Friday and recovered a part of the overnight slump.
• The risk-on impulse undermined the safe-haven JPY and extended support to spot prices.
• A bleak outlook for the UK economy might act as a headwind and cap any further upside.

The GBP/JPY cross maintained its bid tone through the mid-European session and was last seen trading around the 157.35 region, up nearly 0.50% for the day.

A goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - undermined the safe-haven Japanese yen on Friday. This, in turn, was seen as a key factor that prompted some short-covering around the GBP/JPY cross and allowed spot prices to move further away from a near two-month low touched the previous day.

The attempted recovery, however, lacked bullish conviction amid looming recession fears, further fueled by Thursday's softer UK macro releases. The data suggested that the Bank of England's rate hike cycle could be nearing a pause. This might continue to act as a headwind for the British pound and hold back traders from placing aggressive bullish bets around the GBP/JPY cross.

From a technical perspective, spot prices stalled the recent bearish trend on Thursday ahead of the very important 200-day SMA. The subsequent move up supports prospects for additional gains. That said, the fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the GBP/JPY cross has bottomed out in the near term.

Technical levels to watch