GBP/JPY breaks to an 8-year high
GBPJPY broke to an 8-year high on Thursday at 216.55, the highest price since Nov’1998 bringing the cross to a second week of higher price gains.
GBPJPY has been rising steadily since it bottomed out at 148.19 in 2000.However, from early 2004 to late 2005 it traded in a range defined by 205.40/41 on the upside and 189.53/190.02 on the downside. In Oct’05, it broke out of the range to the upside and hit both an 18-month and a 7-year high three months later at 213.10 in Dec’05 which was followed by a sell off and a failed rally culminating in the formation of an ascending triangle.
Figure1: Weekly Chart
Figure 2: Monthly Chart
GBPJPY did not only breakout of this ascending triangle as can be seen from the chart but followed through on Wednesday and Thursday to make a new high at 216.55.Since this cross has broken out of this pattern it will be helpful for us to know the distance it might likely cover. Measuring the height of the pattern and projecting that distance from the breakout point gives us a target of about 225.26 which should be how far it may go based on this pattern
Figure 3: Daily Chart
Furthermore, the fact that GBPJPY is trading above all the EMA’s(50/100/200) on the daily and the weekly charts combined with positive momentum on the monthly and weekly charts suggest that more upside gains are expected. On the other hand, having served as resistance, the breakout point will now reverse role as support to keep the breakout intact and alive. In addition, an overbought condition is being displayed on the daily chart, which indicates that we might experience a correction/pullback probably towards the breakout point. This is normal as a quick run up or down in price causes such conditions to occur. Unwinding this condition will allow the cross to push higher since the higher level charts are bullish.
On the whole, GBPJPY has a lot going for it now as things are really looking up in this cross.
Happy Trading
Mohammed Isah is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available www.tradingmarkets.com/fxtechnicalresearch. He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com