By: Mike Kulej
Last week the GBP-JPY experienced a steep run up. This pair advanced from 130.80 to 135.50, or about 450 pips. In the relation to the latest volatility, it is not an insignificant move, especially during only two days. On Monday, this pair contracted, setting up couple of possible scenarios.
One is that the GBP-JPY will experience a correction on a short-term basis. As this hourly chart indicates, the market is trying to retrace to the latest support of 133.85. If that happens, a bounce at that level is very probable followed by another leg down, to 132.50 or below.
Another possibility is that the “Beast” is awaiting more fundamental news to push it higher. This would be confirmed if the price breaks above the last high of 135.50. That price swings, if it happens, should also be in the magnitude of 100 + pips.
Current consolidation is taking place in a relatively narrow band, for this currency pair. These situations never last long, normally 1-2 days on hourly chart. By identifying likely breakout levels, traders can position themselves for catching a nice, decent size price swing, when the price moves out of this congestion.
