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GBP/JPY 1H Chart 7/11/2012 10:03AM EDT

The GBP/JPY has been bearish in July, and almost pushed below 122.85-123 support. It cracked it a little on 7/9 but has since remained mostly above 123. When the 7/11 US stock market opened, there was some risk-on trading, which pressured the JPY, boosting the GBP/JPY above July’s declining trendline.

We are now going to test the July 5 consolidation area, with a resistance pivot near 124.25, and support near 122.80. Ahead of the FOMC meeting, it will be a challenge to break above 124.25. It is likely going to see some resistance at the 124 psychological barrier, and the 50% retracement of July’s decline, at 124.09.

If the market is risk-on after the FOMC meeting minutes, which should mean it revealed some more potential for QE3, then the GBP/JPY should push above 124.25. If we can hold above 123.50-123.80 area on a throwback, we are likely building toward July’s high near 125.45.

Note that the RSI has broken above 60, and thus violated the bearish momentum. It is at least range-bound, if not bullish.

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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