Forex Video Briefing (11/12) – GBP/JPY Trade Plan
GBP/JPY retreated from a new high on the year of 184.66 after the BoE inflation report, where we saw lower growth and inflation forecasts. This means, the BoE is pushing back its rate hike schedule, something we have come to expect after the previous couple of monetary policy statements.
As the pair approaches the 181.15 low, we should start looking for buyers, especially if the RSI stalls around 40. If the bullish market is maintained, there is upside risk back to 184.66 and perhaps higher, at last toward 185 in the very short-term. Now a break below 180, would not only put in a price top, but fall below a rising speedline from a mid-October low of 168.
So, if we have an entry at 181.20, with a stop at 179.50, and a target of 184.60. We have a reward to risk of 340:170, exactly a 2:1 ratio. If the market does push toward 180, but finds support from the rising speedline, in which case we can consider averaging in another entry, so that the reward to risk ratio will better. In this case, the absolute risk would be greater because of the increased position size, but the absolute reward would greater by a bigger factor.
With the BoJ recently adding more stimulus, it might be prudent to consider buying GBP/JPY on a dip.