Taking a nibble position on GBP/JPY to play a simple Fib setup in the longer-term downtrend. Resistance ahead for the pair?
Fib Resistance on GBP/JPY?
As mentioned in the intro, GBP/JPY is in a longer-term downtrend, going all the way back to March where it traded around 148.00 before beginning the bear run lower over the past five months. The driver of the move has largely been the whole Brexit situation as the odds of a no-deal Brexit scenario rose this year, and the way I see it with British PM Boris Johnson’s latest move to suspend Parliament in September, cutting the time that Parliament would have to stop a highly likely no-deal Brexit on October 31st.
So for now, pressure is likely to come for Sterling once again, and we may be seeing it in GBP/JPY with the major psychological level of 130.00 holding off the bulls at the moment from advancing further from the recent bounce from 127.00. I’ll be starting my short position at current levels with a nibbler position, and I’ll have another short order above the market just under the 61% Fib retracement area in case we see more bullish movements short-term. This could likely stem from the recent round of “risk-on” sentiment after China holds off of any further retaliation to the latest tariff increases from the U.S. My max stop will be one daily ATR from the top of the Fib area and my max target will be the recent swing lows that held off the bears earlier this month. Here’s what I’m doing:
Short GBP/JPY at market (129.70), max stop at 133.30, max target at 127.00 with 0.50% risk
Short GBP/JPY at 131.90, max stop at 133.30, max target at 127.00 with 0.50% risk
I’m only risking 1.00% of my account on this trade if both positions are triggered and I’ve got max potential return-on-risk of around 2.12:1. I do look to add to this position if it does go my way, especially if the upcoming U.K. data or Brexit updates continue to paint a negative picture.
What do you guys think? Let me know in the comments section below!
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