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.

Stop
I would put your stop at 127.47 which is roughly 30 pips above the high at 127.13.

Risk Reward
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.

Regards,

Tyler Lund

3 thoughts on “GBPJPY HEAD & SHOULDERS TRADE PLAN”

  1. Ryan Gandalf van Jaarsveld says:

    hey bud – GBPJPY is range bound – there is no trend right now and a reversal pattern occurs in a trend. The left shoulder, head and right shoulder is just the top of the range on H4, last week’s WM3 with the bottom of the range at WM2

    1. Tyler Lund says:

      Hey Ryan,
      I recognize the current 200 pip range and am targeting the bottom of the range for roughly +80 pips, which is why in the article I define the first profit target as the most recent low and the second profit target as Monthly M1 at 125.9275 which corresponds with the low of the current GBPJPY range. So, the range bound condition of the GBPJPY is built into the trade plan. I do consider this head and shoulders pattern helpful in creating a bias. I think lower highs and lower lows are always important.

  2. Maryna says:

    Hi, I agree with Ryan – this pair is stuck between 125 and 130 area’s and I will wait for a breakout above or below these area’s before considering a trade.

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