Pound/Yen Consolidation An Opportunity For Scalping Strategies

Key Technical Levels

After failing to close below the 148.00 price level, the GBP/JPY has started to settle into a tight range between 148.50 and 149.50 creating an opportunity for scalpers. The price level has been breached since mid May and has withstood a second threat. We have started to see volatility drain from yen crosses as it appears the dollar has become the preferred funding currency making them less susceptible to risk sentiment. However, be aware that tomorrow’s FOMC meeting could alter that relationship, but until then the pair appears ripe for short-term profits.

Quantitative Metrics

A sharp decline in the ATR for the GBPJPY is indicative of the recent consolidation that we have seen. However, the pair’s range is still at the higher end of the pairs listed below. A narrowing Bollinger band also provides evidence of the tight range that the pair finds itself in and another positive sign for scalpers. An implied volatility of 13.25 is concerning and increases the risks for the pair. Additionally, the wide gap between the 5-day and 20-day SMA’s which is a result of the width of the current medium term trading range between 148.00 and 163.00 and a sign that volatility could return at any moment.

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To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com