GBP/JPY bearish formation during Asian session signaling possible test of trend line.

GBP/JPY

GBP high impact news in within the next 2 hours on Claimant Count Charge and ILO unemployment (3 month) which is a leading indicator for the UK economy. Consensus is showing slight increase which would support the GBP/JPY drop.

 

Key Points:

  • Price holding above the 200 EMA
  • Price holding below the 50 EMA
  • 21 EMA has crossed below 50 EMA
  • Bearish flag forming at the 50 EM
  • Drop of volume within the flag
  • A large tail rejection candle (Pin bar) at optimal entry would be highly desirable for entry

 

Key Levels:

Support – 200 EMA, 137.000, 136.650

Resistance – 137.675, 50 EMA

 

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 137.550

Supporting Entry – 137.500

 

Candle Reversals for entry

  • Bearish Shooting Star
  • Bearish Engulfing
  • Bearish Dark Cloud CoverBearish Candlesticks

 

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

 

IF: Price breaks above 137.740 level and violates 50 EMA – this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

 

Reward / Reward Targets:

Optimal Entry 137.550 – Target 1 137.000 = 3x Reward to Risk

Optimal Entry 137.550 – Target 2 136.650 = 5x Reward to Risk

Supporting Entry 137.500 – Target 1 137.000 = 2x Reward to Risk

Supporting Entry 137.500 – Target 2136.650 = 3.8x Reward to Risk