[TW] 6-20-2011 - GBP/JPY (Long) by littlebopip

[B]GBP/JPY: Weekly[/B]

[B]Long or Short: [/B]Long

[B]Entry Point:[/B] 127.00

[B]Stop Loss: [/B]123.00

[B]Profit Target/s: [/B]135.00, 140.00

[B]Reward-to-risk Ratio: [/B]2.625:1 (average of 2:1 on the first half and 3.25:1 on the remaining second half)

[B]Risk percentage: [/B]I’ll risk 1% on this trade so I’m hoping for a 2.625% win if it rallies all the way up to my second profit target.

[B]Indicators used: [/B]RSI (14)

[B]Trade Rationale: [/B]I’m not so familiar with currency crosses but I learned that these pairs usually respect major support levels. I looked at the weekly chart and noticed that GBP/JPY is nearing the strong support at 127.00, which has held since May 2010.

I placed my buy order at that support level and my stop around the recent spike down to 123.00. I set my first profit target at the 135.00 handle, which is around the middle of the range. I placed my second profit target at 140.00, another round number, which is the top of the range.

Lately the pound got battered by poor risk appetite and weak economic data from the U.K., which is why GBP/JPY is about to test 127.00.

The pair could have a chance to rebound next week when the BOE releases their monetary policy meeting minutes and holds their inflation report hearings. Besides, Japan is having political problems of its own and could be negative for the Japanese yen.

Besides, risk sentiment could improve next week if the euro zone leaders reach an agreement on what to do with Greece.

[B]Trade Adjustments: [/B]If the BOE minutes turn out to be very dovish, I will close my open orders/trade immediately.