GBP/JPY is currently on track to weaken for a sixth consecutive week. This slide occurs within the first significant consolidation period that we have seen throughout the historic three-year rally.
Last 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 level and the 50-day SMA which at the time traded at 172.53. Price also formed a bullish Gartley pattern that supported one last thrust towards 174.00 before resuming the bearish correction.
Critical support now currently lies at the 200 –day SMA which is currently trading at 170.45. If this level holds a rebound may target the 100-day SMA at 172.30. Any strong breakdown below 170 would place the 118.77 to 175.35 rally in jeopardy, with major downside targeting the 165.30 zone.
The trade: Sell GBP/JPY at 170.35 with a stop loss at 171.35 and a take profit at 168.35. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading