GBP/JPY Setting Up To Resume 2300 Pip Downtrend
The GBP/JPY is currently one of the clearest trends in Forex. The last leg of the down move began on April 8th of this year with a high placed at 140.01. The pair has moved as much as 2,319 pips lower to our low found at 116.82 on August 22nd. As price bounced off daily resistance yesterday at 122.50 we will look for our trend to continue and lower lows to be established.
Fundamentally, the JPY still contends to be the safe haven currency of choice. The worse the global economy gets, conversely the yen will gain strength. When paired with a weak currency such as the GBP we are looking for our strong trend to continue. Retail Sales for the UK is on the economic calendar for tomorrow and will give us further insight into the strength of the GBP/JPY move.
Taking price into a 4Hour chart we can see our temporary reversal concluding. Price tested resistance on October 17th with a high of 122.65. The GBP/JPY has since broken out from its trend line support at 120.80. Breakout traders may await confirmation of lower lows and look to enter the GBP/JPY under the next line of support at 120.32 established from the October 13th low.
My preference is to sell the GBP/JPY currency pair on the creation of new lows. Entrys should be placed under 120.30 Stops should be placed above resistance at 122.50. Limits should look for a minimum of 400 pips near 116.50 on the creation of new lows while establishing a clear 1:2 risk reward ratio.
Alternative scenarios include price retesting resistance prior to a breakout.
---Written by Walker England, Trading Instructor
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