By: Mike Kulej
All of the Japanese Yen pairs have followed very similar path – they advanced sharply after the joint G7 intervention in March, and dropped since. The only difference is how much they fell, which largely depended on a relative strength of the cross currency.
In case of the GBP/JPY, the pull back has been a little larger than in others, because of the broad weakness of the British Pound. After falling from 140.05 to 130.26, this pair gave up over half of its original rally. At present, it is ready to try to go even lower.
The price is about to test the minor low of 130.26, but perhaps more ominously it is breaking the support of the Ichimoku cloud. The GBP/JPY stayed with the cloud during the past three weeks, but is now moving under it. This changes the polarity of the cloud, or Kumo, from a support to a resistance, a very bearish sign.
While the Ichimoku chart is bearish, the GBP/JPY still needs to break the 130.26 support. That should be accompanied by a rise in the ADX indicator, giving more weight to a strengthening down trend. The caveat is that if the JPY becomes too strong, another intervention could take place. For now, however, the Pound/Yen pair is bearish.