The GBP/JPY like the rest of the JPY offerings this week has been relatively flat, forming what might be considered a Bullish Pennant formation on the Daily chart and just aching for a breakout. Traders went short towards the end of the London session or beginning of New York trading, only to fully reverse the position after several disappointing announcements yesterday including less that stellar Japanese retail sales. This created a Daily Pin Bar on support at 130.65 as well as the Weekly Pivot at 131.093 (inlay). The pair appears poised now to head higher after faking the bears out and returning the reigns to the bulls. Also interesting is that this pair has now confirmed the descending trend line breakout that ran from May 2010 to November 20th when it was finally broken by the bulls. Now that there has been a pullback/consolidation for several days we will look for key resistance levels of 133.26 (March 2012 Highs) and 134.50 the top of the box that formed between October 2010 and June 2011. Finally we could see the pair retest the June 2010 highs which line up with the Weekly R3 at 136.66. The most important support for the pair now becomes the broken trend line at the 129.00 area with 130.65 & 129.866 running defense on the way down. This could very well be the beginning of a new and long bullish run for this pair.
Happy Trading