Forex Technical Update
GBP/JPY daily Chart 6/6/2012 7:10AM EDT
The short-squeeze of risk has put pressure on both the USD and JPY. The GBP/JPY for example has recovered from 117.30 up to the 122.80 level. The daily chart shows that this is a previous resistance pivot. As we gear up for the US session, let's monitor this area for resistance. So far, price action is actually accelerating its attack, so there is a heightened it will break.
Risk appetite can improve if ECB and Mario Draghi talks up monetary operations to try to increase liquidity as well as address possible cures for the euro zone bank crisis. This would likely carry the GBP/JPY above 122.80 and the 123.00 handle. Another risk factor that has been pressuring the JPY this week is that Japanese officials have already began talking it down, giving the market speculative fuel for possible intervention if the JPY strengthens further.
The daily chart shows that the next resistance is in the 124.00-124.60 area. The 200-day simple moving average resides at the 124.00 handle, and a previous support pivot is at 124.60, which could be tested as a resistance pivot.
GBP/JPY 1H Chart 6/6/2012 7:13AM EDT
In the short-term, if the GBP/JPY fails to push above 123 area, and risk aversion comes back, a return below 122.00 suggests a test of the 120.80 pivot with a break below that opening up the bearish continuation scenario. We are entering consolidation mode, so we should not have aggressive targets on either side, and it would likely take some time before the market establishes the boundaries for consolidation.
Fan Yang CMT is a trader, educator and a Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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