GBP/JPY 1H Chart 8/5
Notice the reaction at the trendline. The 4H chart shows a bearish engulfing pattern followed by candles within that engulfing candle. A break below 173.10 can start things off, but price might have to deal with a near-term rising line around 173.00.
Let's consider a bearish outlook from the trendline, but be quick to switch outlook if price breaks above 173.40. Let's see we plan an entry at 173.25. If we put the stop at 173.55, there would be a 30-pip risk. To the downside, we are looking at a bearish continuation or at least a re-test of this week's lows around 172.50. That yields a potential of 75 pips. The reward to risk ratio of this trade would be 2.5:1.
Now let's consider a break above 173.40. Given some elbow space, this can be a key breakout that should put pressure on the 174.00 level, which is likely reinforced by a falling channel resistance seen in the 4H chart. A break above this level can liberate GBP/JPY from the current neutral-bearish outlook in the short-term, and revive the bullish trend in the medium, long-term. If there is a break above 174, we should start considering buying on a dip.
GBP/JPY 4H Chart
On the 4H chart you can see the support/resistance factors around the 173.45 level. Thus inability to push above this level reflects continuing bearish momentum. A break above 173.50 on the other hand would reveal that bulls are in charge.
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