By: Mike Kulej
After spending couple of years in a downtrend, the British Pound had finally rallied against the Japanese Yen following the joint G7 intervention in that currency. It is still debatable if the long-term trend has reversed, but the GBP-JPY appreciated about 1700 pips in couple of weeks.
The price corrected substantially after reaching 140.00, but that is still in line given the magnitude of the preceding rally. It looks like the GBP-JPY spent past few days creating a reversal pattern, best visible on an intermediate term chart, and could be ready to resume the uptrend.
Since making a minor low at 132.87, the volatility disappeared, exemplified by sharply contracting Bollinger Bands. Most recently the price started to move more, rallied to 137.03, suggesting much larger swings ahead, probably very soon.
This minor high is at the same level as another high from mid April, which creates an important resistance in the GBP-JPY. A move above it would complete the reversal pattern on this chart, and set a stage for a likely rally back to 140.00. If the breakout happens, it should be confirm by more activity in indicators like the MACD and the RSI, both of which show neutral reading now.