GBP/JPY awaits the outcome of G20, range 138.20/135.38

• GBP/JPY consolidates ahead of G20 key event, risk on ice.
• To the upside, and from a surprise positive progress from Xi/Trump meeting, bulls can target 138.20.

Markets were relatively subdued ahead of G20 and GBP/JPY has moved into consolidation at the midpoint of the 136 handle and between the 38.2% and 50% retracement of the June swing low to prior corrective highs earlier in June.

GBP/JPY is going to be in for a rough rise should the G20 not deliver the desired outcome of tariffs being put on hold and some sort of plan of action between Washington and Beijing to move closer towards a trade agreement. then, when coupled with Brexit risks, there is a compelling case for the downside. However, anything to the contrary would be bullish. Indeed, hints of optimism on the trade front have been evident to date, although the most recent sentiment has turned a little less so and favourable to risk-off plays, such as the Yen.  

Overnight, The Wall Street Journal reported that China wants to make sure that the U.S. remove its ban on the sale of U.S. technology to Huawei Technologies Co. as a precondition in trade talks. Furthermore, President Xi is said to take a "confrontational tone" with Trump. The most that markets might hope for, might be a ceasefire, with both sides delaying additional tariffs - This could well be risk positive, but the fine print of such an agreement will be critical. 

As for UK politics, the Brexit uncertainty has intensified. "With the next Prime Minister likely to adopt a more hard-line approach, the risk of a hard Brexit (or a no-deal Brexit) has increased. GBP/USD could trade in the 1.20-1.25 range in Q3. We continue to recommend selling rallies in GBP/Asia crosses," analysts at ANZ Bank explained. 

GBP/JPY levels

To the downside, the cross can target 135.38 on a break of 135.80. Tot he upside, 138.20 marks the prior corrective highs earlier in the month in June. 137.20 were the more recent corrective highs.