A head and shoulders pattern is in play on the GBPJPY and a lower low has been created in the right shoulder, with a pullback in range of the 61.8 fibo retracement. The inherent lower high built into this right shoulder and the subsequent lower low are strong indications that the GBPJPY has failed to push higher and is turning bearish.
WAIT FOR THE PULLBACK
Look for price to pullback in range of the recent high at 127.17 or the 61.8 retracement level. Note that the psychological level 127.00 is in range of the 61.8 as well and should add resistance. We are looking for the GBPJPY to prove that it isn’t going to break its’ recent high at 127.173 before getting short. So, I want a pullback that is within proximity of the high, which doesn’t break the high. It would be better to get into the trade a little late as it begins to drop than too early and get stopped out with price breaking above the most recent high.
I would put your stop at 127.47 which is roughly 30 pips above the high at 127.13.
If you can get short near resistance at the 61.8 fibo or within range of the high at 127.17 then there are about 100 to 90 pips in the trade down to the most recent low at 126.119, which would be a conservative take profit on this trade considering that this pullback is a lower high in range of the 61.8 that should push lower than this previous low. A more aggressive profit target would be Monthly M1 at 125.9275 with is roughly 125 pips from the recent high at 127.17. The risk reward on this trade is roughly 3:1
I have highlighted previous lows in green to identify potential support on the way down.
Weekly and Daily pivots are not included in this trade plan because new pivots are going to be created at market open. So, check your Weekly and Daily Pivots for resistance within range of the resistance levels mentioned above. The GBPJPY likes Weekly Pivots. I most likely will update this plan and post again once the new pivots are created for this upcoming trading week.
Session to trade this
The Asian Session at market open can be active on the GBPJPY, so I would look at trading the Asian Session. IF the trade doesn’t play out in Asaia I would keep your eye on the London session. I imagine this head and shoulders will catch the attention of a number of the big banks.