GBP/JPY has been fairly quiet over the last 48 hours, which isn't necessarily bad surprising considering all of the risk in the markets over the course of this week. This pair does tend to be very risk sensitive, and as such many traders would be a bit nervous getting involved at this point in time.
With the ECB, Bank of England, and the labor numbers in the United States all making headlines this week, it is very likely that this pair will make a serious move sooner or later and that it could be a fairly long-lasting one. With this being said, I have a lot of interest in this pair as it does tend to move rapidly once it makes up its mind.
Confluence of factors
The pair currently finds itself at the 125 handle, which is a spot where several different things happen at one time currently. For starters, it is a large round psychological number which will always attract traders in one form or the other. Not pictured on the chart simply because it goes back to far, is the fact that the 125 level (or so) is the 50% Fibonacci retracement from the downtrend. This of course will offer resistance and many traders will be banking on it to backstop their short trades.
On top of that, you see a green moving average on the chart and this is the 200 day exponential moving average. You can see is just above current pricing, and this suggests that a lot of trend traders will be looking to sell here as well. However, if there is a new "sugar high" in the stock and the risk markets, we will see this pair breakout.
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The nice thing about this trade is that the 126 level is such an obvious end to the resistance on shorter-term charts. Is because of this that I am willing to buy this pair on a break above 126 at the daily close. However, I am fully aware of the fact that there is plenty resistance to be found in this area, and as such am willing to sell on signs of weakness also. On a short though, I do see that the 123 level would be rather supportive. While I do not expect a trade the fire off right away, I do expect by the time Friday rolls around we should know where the next several hundred pips are in this market.