Why I think GBP/JPY hits 210

As the daily chart below shows, the cross has been
relatively narrowly traded the last few weeks, consolidating around the 204-205
level. The action late last week and in to the start of this one looks
like it might be changing the outlook a bit, though. Notice how the
Bollinger Bands had gotten very narrow. In fact, as the Band Width
Indicator (BWI) plot at the bottom of the charts shows, the Bands started April
at their lowest relative width in about a year. That indicates a market
set-up for a volatility expansion. The recent break through 206 looks like
it may be the start of that. The Bands are widening and GBP/JPY has broken
some important near-term resistance. That seems a pretty good indication
that we might be seeing a nice rally starting.

I’ve recently written about how EUR/USD and EUR/JPY show signs of
being set up for major long-term moves. Alas, I cannot say the
same thing about GBP/JPY at this stage. The weekly chart below
just does not provide much indication in that manner.

Notice the contrast between the two timeframes. While both have seen
significant consolidation lately, on the weekly timeframe there aren’t yet any
indications that the range is giving way to a new trend. The Bollinger
Bands are holding at a steady width and there is both good support and solid
resistance.

What that leaves us with is a probable run up in the short to intermediate
term, but one which is likely to face resistance in the longer-term. That
is why I think GBP/JPY will run up to the 210 area over the next couple of
weeks. At that point, though, it will probably stall out, at least for a
while.