GBP/JPY in a Tight Spot

GBP/JPY made a big break downwards and is now hanging around a critical point. This volatile pair doesn’t stay too long in a narrow range. An update about the dragon.

GBP/JPY fell on Thursday from 144 to 139 in a matter of hours. Most currency pairs don’t see a 500 pip movement in a short period of time. There’s a reason why GBP/JPY is popular with action loving traders…

The Geppy fell due to risk aversion trading:

This means that the dollar and the yen strengthened across the board. The stock markets were in the red that day and fear of ongoing hardship towards recovery were looming on the world.  GBP/USD lost an important technical level, 1.5720 – this triggered more stop orders – fast downfall of the Pound. The yen enjoyed the “safe-haven” status and gained against the dollar and against everybody else.

GBP/JPY Technicals

Losing 139.05: The Geppy broke the December low of 139.24, the October low of 139.70 and April’s bottom of 139.05. Reaching 138.25, GBP/JPY was 80 pips below the critical 139.05 bottom but bounced back. A violent false break for this crazy pair.

GBP/JPY now trades just above 140 but it’s still far from the 144-150 range it traded in recent weeks. Danger still exists.

If the fall is renewed, the levels to watch for are 135.70 which was the low level at the end of March, followed by 131.70 which was bottom earlier that month. Even lower, 127 was a bottom a year ago, and this is followed by 118.90, the historic low.

Looking up, 143 is a critical line for GBP/JPY this is necessary for stabilization. If the pair rides above 146, then it will gather strength for a possible upwards move.

GBP/JPY events

No important figures are due from Japan, but Britain has a busy calendar on Wednesday, with BOE Inflation Report and the NIESR GDP estimate. Read more in the British Pound forecast.

Risk aversion or risk appetite can happen anytime but they depend mostly on the dollar’s figures, towards the end of the week, and Friday’s wild trading.

I’ll be following this exciting pair…

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