GBP/JPY at 4-day high, but risk reversals hit 9-day low

• GBP/JPY at 4-day high on Brexit optimism.
• Risk reversals indicate increased demand for GBP puts.

GBP/JPY extended yesterday's 200-pip rally to a four-day high of 152.64 in Asia on reports that reports that the UK, Ireland, and the EU are working through the night to try and reach a breakthrough on Brexit negotiations.

A formal announcement is expected today. Hence, Sterling is trading higher across the board. Still, investors are cautious, which is evident from the drop in the risk reversals gauge.

The one-month 25 delta risk reversals gauge dropped to -1.25 yesterday; the lowest since Nov. 29. The decline indicates increased (hedge) demand for GBP puts.

GBP/JPY Technical Levels

The currency pair was last seen trading at 152.55 levels. A move above 152.95 (Dec. 4 high) would expose 153.63 (late Apr. 2016 low) and 154.00 (psychological levels). On the other hand, a move below 152.30 (session low) could yield 151.60 (5-day MA) and 150.80 (10-day MA).