November 17, 2009

The GBP/JPY Pair - Are We About To See A Big Breakout?

The GBP/JPY currency pair is usually one of the liveliest currency pairs because it can often move several hundred points in a matter of minutes. However it's interesting to note that it's basically been trading sideways for the last four weeks or so.

If you look at the daily chart you can see that the price recovered from it's lows in mid-October, and since then it has remained in a fairly tight trading range. Although the price did briefly rise to 153.25 and fall as low as 145.80, it hasn't managed to break out as of yet, and indeed is trading in an increasing narrow trading range.

You can see this on the 4 hour chart as well because not only are the candles very small (indicating a lot of indecision) but the various different exponential moving averages, ie the 5, 20, 50, 100 and 200 period EMA, are all flat at the moment.

So the point is that sooner or later the GBP/JPY is going to break out of this trading range, and because of the fact that this sideways trading action is lasting a long time and the trading range seems to be getting smaller and smaller, the breakout is likely to be a big one.

Lots of traders will be watching this pair at the moment so any breakout that does occur is likely to have a lot of momentum behind it.

The bias is currently towards an upwards breakout simply because of the fact that the Supertrend indicator is still green on the daily (and weekly) chart. However it's a hard one to call at the moment.



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