The 4H GBP/JPY chart shows a market that has returned to a previous resistance zone between 129.70 and 130.00. Note that after the break above this resistance, the market hit a conventional breakout target using the width of the range projected in the direction of the breakout.
The GBP/JPY is finding some short-term support at this pivot area but price action looks bearish since the 133.43 high. The intermediate term outlook is still bullish as the 4H and daily charts show higher highs and higher lows since the left side of the chart and is trading above this time-frame’s 200 simple moving average.
Buy on dip strategy: While the 129.70-130 area is a possible support area, the price action and bearish momentum in the 1H chart points south. A break above 131.60 and we will likely not get a lower price for renewed buying. BUT, the preferred scenario here is that we DO get some extended bearish correction, down toward the 128.00-128.20 area. This is the central pivot of the previous range, and also a rising trendline. There might even be support at the 61.8% retracement at 129.15 area.
Double entry and Risk: If we say that below 128.00 the bullish outlook does not look good anymore, a stop can be considered just below that, let’s say at 127.60. From 128.20 that’s 80 pips. From 129.20 however, that is 180 pips. A planned double entry one at 129.20 (if there is a reversal sign there in the intra-day charts like the 15-min chart), AND another at 128.20, would have an average entry at 128.70. This yields a 110 pip risk.
Target and R/R: The first target for a market that stays above 128.00 is back to the 133.43 high. Let’s just say 133.00 to be conservative. The double entry strategy thus yields a 110-pip risk, and a potential reward of 430-pips, yielding a reward to risk profile that is just short of 4:1.
Note that the market might still be bullish below 128.00, but the target will be revised in consideration of an increased bearish likelihood. From the 126.50-127 area, support can bring the market higher, but the first target would be first limited to the 129.70-130 level.
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Fan Yang CMT a trader, educator and a Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.0