GBP/JPY is about to end the bearish correction

A new week on most of the instruments started with the strong reversals of the latest mid-term trends. One of the brightest examples can be spotted on the GBPJPY as a pair that is loved by traders for its volatility. On the GBPJPY it has been exactly a year since the up trend has started. It reached its peak in the middle of September when the price climbed to the 152,7. Since that, we were witnessing a strong drop aiming a very important support.

That support is a 38,2% Fibonacci in the same time strengthened by the historical tops from the December, May, and July (orange area). Only the fact that the price is there is not enough to open a long position. According to the price action rules, what we should do is to wait for signs of the demand here. Actually, a bit of buying pressure can be seen now, as, on Monday, the price is climbing higher, above the 38,2% Fibonacci. If we will be able to close the day here, that will be a very positive sign.

Price closing the day around the current levels would additionally make that breakout from Friday a fake one, which would be just another reason to go long. Entering with a long position here has a good risk to reward ratio as stop-loss order should be placed below today’s lows. The potential target for this bounce is the highs from September, which makes a potential profit three times higher than the loss. According to the Money Management rules, that is a risk worth taking.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis