Not a currency pair for the faint hearted! The GBP/JPY can be an extremely volatile pair to trade yielding good profits quickly, but losses can mount equally quickly, so excellent risk and money management rules are the key to success. So where is the GBP/JPY heading now?
The price action of Thursday and Friday last week really sums up the pair, with strong gains on Thursday, promptly being reversed on Friday. Despite this, the longer term outlook for the pair remains bullish following the breakout from the sideways price congestion in the 126.00 to 127.50 which was well defined with the pivots to the upper region of this price band adding a further leg up in the longer term trend. The initial entry signal was delivered by our trading indicators in mid August with them transitioning from dark red to green, and this was duly validated with two aggressive entry signals. Further confirmation arrived in the middle of September as the three day trend finally moved to bullish to support the trend on the daily chart. Finally in early October our second trading indicator delivered the first of two conservative signals which were validated last week with the grey re-entry signals.
With a strong platform of support now below, and with both the daily and the three day trend green, outlook for the pair remains firmly bullish. Trading today has been muted due to the lack of market activity in the US markets, with the pair trading in a tight range, currently at 127.90 at the time of writing. Despite selling volume on the daily chart on Friday, and the minor pullback today, expect to see further bullish momentum in the short to medium term, and provided the pair break above the 130.00 region, then we should see the GBP/JPY test the 135.00 high of March in due course.
By Anna Coulling