GBP/JPY looks to extend recovery from multi-month lows further beyond 135.00 mark

• GBP/JPY tumbled to five-month lows on the first day of a new trading week.
• The coronavirus-led selloff in equities boosted to the JPY’s safe-haven status.
• A pickup in the GBP buying extended some support and helped limit losses.

The GBP/JPY cross managed to recover over 150 pips from the Asian session flash crash to five-month lows, albeit struggled to extend the momentum further beyond the 135.00 mark.

Following a bearish gap opening, the cross crashed to sub-133.00 levels on the first day of a new trading week and was being weighed down heavily by strong safe-haven demand for the Japanese yen.

The worsening coronavirus outbreak, coupled with plunging oil prices rattled the global financial markets and triggered a fresh wave of risk-aversion trade, benefitting traditional safe-haven assets.

The fact that the number of confirmed cases across the world increased to almost 107,000 as of Sunday, the continuing spread of the virus continued weighing on the investors' sentiment.

The market worries compounded further in the wake of crashing oil prices, which recorded the biggest single-day rout since the first Gulf war in reaction to a price war between Saudi Arabia and Russia.

Saudi Arabia slashed its official selling prices and made plans to ramp up crude output next month after Russia refrained from making a further steep output cut proposed by the OPEC+ alliance.

Meanwhile, absent negative Brexit-related headlines attracted some buying around the British pound, which extended some support, rather assisted the cross to recover swiftly from early lows.

However, concerns that Britain might crash out of the European Union at the end of the transition period later this year seemed to be the only factor capping any further recovery, at least for now.

Technical levels to watch