Earlier this month, GBP/JPY formed a three-drives-to-a-top pattern after price made a high at 175.35. The selloff eventually found support around the 173.00 and triggered a rally towards 174.50 which was met by sellers. The sharp drop is currently suggesting that the pair might see bearishness target a move towards the 50-day SMA at 172.53. It is around that area that we may see price tentatively form a bullish Gartley pattern.
Price action on the daily-chart displays that point D of the bearish Gartley pattern may form around the 127.2% Fibonacci expansion level of the B to C move. Further support may come from the 171.79 level which is also where the 100-day SMA is trading.
Major upside resistance on any rebound will be the 175.50 region. Eventually longer-term upside may target the 183.95 level, which is the 50.0% Fibonacci retracement of the historic 251.09 high to 116.82 low move.
The trade: Buy GBP/JPY at 172.55 with a stop loss at 171.75 and a take profit at 174.25. The Risk/Reward Ratio is around 1:2
Edward J. Moya
WorldWideMarkets Online Trading