Ascending Triangle Break on GBP/JPY

Forex Trade Idea: 2014-12-02

After two weeks in the making, we finally saw a break of the strong resistance area off of a ascending triangle pattern. Is this a new move to the upside for guppy?

GBP/JPY 1 Hour Forex Chart

GBP/JPY 1 Hour Forex Chart

Of course, we won’t know if this is going to be a real breakout or fakeout for another week or so, but I think it’s a risk worth taking with fundamentals and price trend in favor of a weak Japanese yen. Plus, the higher lows it shows that buyers are not shy about hopping into this pair and so far, the market seems to be holding above the strong resistance area around 186.00.

There is event risk this week in the form of the Bank of England monetary policy decision, which is why I’m going with a very wide max stop (one WATR) to weather any big spike in volatility. And if the MPC meeting changes the overall story on whether or not it’s a good idea to be long Sterling, I’ll look to close early on a sustained move below the ascending triangle; I won’t likely take the max loss if the pair goes against me.

My initial target is the next major psychological round number, but I’ll re-assess at that point on whether to take profit or go for the next major area of interest not seen since the 2008 financial crisis, 197.50. Here’s what I’m doing:

Long full position at market (186.50), max stop at 183.25, initial target at 190.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1:1 at my initial target. If I decide to go for my big target at 197.50, I’ll look to scale into a bigger position and trail my stop to reduce my risk. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!