The monthly chart of the GBP/JPY shows how price is sitting just above the 38.2% fib level of the 2007-2012 bear move. I've been noting over the last few weeks, though, how a bullish 'inverse Head and Shoulder' pattern looks to be forming up on the daily chart of the GBP/JPY.
Price is now trading up at the 'neck line' of this potential pattern. The height of the 'Head' from the 'neck line' on this 'inverse H&S' is about 1000 pips. The theory suggests that any bullish continuation with this move could be expected to extend from the 'neck line' by the same order of magnitude, that is, by 1000 pips. Such a move would put price up around the 182/183 region which is just below the 50% fib level. I would actually be expecting price to travel further than this though and back up to the 200 region which is a strong region of previous support/resistance and also the 61.8% fib level. These 61.8% fib levels seem to be quite strong magnets for price action.
I will be looking for any daily chart, break and hold above the 'neck line'. This is also the area of the monthly 200 EMA and, thus, I would expect some choppiness, at a minimum, around this region as it is a key S/R area.
I have drawn in a support trend line on the 4hr GBP/JPY chart and this has not been broken as yet. Any choppiness at this S/R region could trigger a break of this 4 hr support trend line and might tempt traders to 'short' there. Such a bearish move could deliver some handy pips even if there is to be overall bullish continuation. Any bearish pull back, though, could also just end up being a pause and result in a 'Bull Flag' type of pattern so traders need to keep an open mind here to all of the possible trading outcomes.
G/J 4 hr
Ichimoku charts for the GBP/JPY:
Price is trading above the Cloud on the 4 hr, daily and weekly time frame and is nearing the top of the Cloud on the monthly chart. This looks to be quite bullish.
G/J monthly Cloud:
G/J weekly Cloud:
G/J daily Cloud:
G/J 4 hr: