GBP/JPY Analysis (Wk Strt 1st April 2012)

Ever since I started posting my weekly analysis updates to Facebook people have been asking me for GBP/JPY analysis. I shouldn’t be surprised, this blog was primarily a GBP/JPY trading blog for several years.

I do not trade GBP/JPY any more because of the dramatic change to its average daily range in mid 2010. However, I have been keeping an eye on GBP/JPY for the last few weeks, and its clean and consistent moves have surprised me. The pair seems to have calmed down, and a calm pair is usually an easy pair.

GBP/JPY Analysis

Going Long on GBP/JPY

Going long on GBP/JPY could be very dangerous right now. The pair is currently sitting at a ten month high and the high has been tested three times without a successful break. The most interesting thing is that each consecutive test of the high is lower than the last. On the chart below you will see that on the 21st of March the price reached 133.47, on the 27th 133.37 and today 133.35. This shows us that the Bulls are struggling to make new highs.

*Unless I specify otherwise please assume all images are of 4hr charts.
GBP/JPY Analysis Resistance Area

If the Bulls are going to reach the next resistance area at 134.10 they will need to break the resistance area at 133.00-133.35. After breaking through 133.00-133.35 they will also need to break the high set on the 21st of March at 21st of March at 133.47.

GBP/JPY Analysis Resistance at High

If the Bulls manage to break the march 27th high of 133.37 that would be a good sign for longs. However, in my opinion taking a long before the price breaks 133.47 is extremely risky. If the Bulls break 133.47 the next resistance area starts at 134.10.

Going Short on GBP/JPY

On the short side GBP/JPY has much more room to move. The area immediately below the current price is relatively clear. The next support is at 131.45-131.80 below that the next support area is at 129.95-130.40.

GBP/JPY Analysis Support Area

GBP/JPY Ranging

on the daily chart below you can see that GBP/JPY has been ranging between two Support and Resistance areas for almost three weeks. This range has produced two good reversal trades already. If GBP/JPY remains trapped in this range we may see some more reversal good trades.

GBP/JPY Analysis Ranging

If you’re wondering why my Support and Resistance areas on my daily chart are different to my 4hr chart it is because I set them separately. I find that using 4hr Support and Resistance areas on a daily chart is limiting because they area are too closely spaced.

Conclusion

GBP/JPY could go up and make a new ten month high but going long to early could be dangerous. The Bulls set a high at 133.47 on the 21st of March and that is now acting as a barrier. Going long before a break of 133.47 is dangerous as there are a lot of sellers in the area. GBP/JPY doesn’t have much support on the short side until 131.45-131.80.

Right now the best scenario would be continued ranging as it would provide good reversal trade opportunities.

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