The GBP/JPY pair had a slightly positive session on Monday, but as you can see we are still simply meandering around the 173 level. This is a market that is very sensitive to risk appetite around the world, so obviously I tend to watch this incongruence with stock markets such as the Nikkei, the DAX, and the FTSE. If all those are going higher, this pair generally does the same. It does look like we are starting to see a little bit of a pickup in the potential bullishness of some markets around the world, with the Nikkei breaking above the ¥15,500 level, while the New York indices all formed bullish looking hammers for the day on Monday. Because of this, I believe that risk appetite may come back into the marketplace.

However, I think that this pair needs to break above the 173.50 level in order to be truly “broken out”, and as a result I would be a bit hesitant to get involved until that level is broken to the upside. If that happens, I think that the momentum should continue to push this market to the 174.50 level, and then ultimately the 175.50 level which is close to the highs.

Remember to watch several markets.

The longer running correlation between risk appetite and this pair is well-known, so a lot of traders will get involved if we are seen green arrows around the world. With that, this is one of my favorite pairs to be involved in in the situations. However, beyond watching several markets, I would suggest that watching the 172.50 level might be necessary as well. If we break down below there, I feel that this market could fall way 171 without too many issues, and possibly even as low as 170. Either way, I feel that we are going to get a signal fairly soon, but ultimately this pair does have a bit more of an upward bias to it, as the British pound has been stronger than most other currencies in general.

GBPJPY 72914

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