By: Mike Kulej
One of the most popular speculative currency pair is the GBP/JPY or “Beast” as it is commonly known in trading circles. The reason is simple – this cross tends to have large price swings and can be very volatile. This translates to potentially good trading opportunities, hence the popularity.
In the past few months, though, the GBP/JPY has been less volatile. Trading ranges on all time frames lean towards historically lows, as indicated by ATR and an average price swings are smaller than they used to be. Still, they are measured in hundreds of pips, and larger than in many other pairs.
Recently, the GBP/JPY sold off from 130.82 to 124.80 in mid July where it reacted sharply. The rebound, however, stalled under the 100 SMA and turned sideways, with a high at 128.40. On the intermediate term chart, this created a possible rounded top, anchored by a 126.65 support.
No the price is testing this support again. It could recover from this level, but chances are that it will break through – if not now then during the next attempt. That could send the GBP/JPY to the low of 124.80, representing 175 pips, a large move by most standards. One should be aware that the Bank of Japan has threatened intervention, which could override technical developments.