Forex traders looking for big risk and potentially big profits seem to gravitate to the GBP/JPY as much as any of the majors. I see more chatter about this pair than almost anything else except the EUR/USD. Besides the big breakouts, the interest rate differential makes long positions on the GBP/JPY even more attractive and I think there is a short term long opportunity brewing right now.
In chart #1, the market has been channeling into a pennant and a short term analysis for price projections seems to offer some upside potential. I am looking for 222.00 as an initial profit target based on the rally from the candlestick hammer on the 16th of July to the top of the pennant on the 23rd. You can see this simple analysis in chart #1.
Caveat emptor - quite literally! I think the real risk here is the fact that long term resistance, as shown in chart #2, runs right through the apex of this consolidation; therefore, this needs a clean break above resistance before getting long. A limit order at or above the top of the pennant (216.00+) seems sufficient to snag a breakout and reduce the chance of a whipsaw.
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