We’ve talked a lot in the comments tonight about how our chart’s timeframe influences our trading decisions and style. To that end, let’s take a look for clues in three different timeframes about where GBP/JPY might be heading next.
The one hour:
It looks like the pair is setting a base around 170.70, maybe even rounding its way upward. The green line above it is a rough resistance line that makes more sense when you look at it from this angle:
From this view it seems way too early to call the 170.70 resistance a rounding base of any kind. Not pictured is the 4hr RSI at 28-ish. If I’m trading this chart, I’m not trading at this point. Okay, if I’m feeling adventurous maybe I’d put on a long with a stop around 170.200 and profit goal near the top green line, which is around 171.50. But maybe the daily chart is less ambiguous:
This makes the 4hr play look too much like taking a shot at a reversal or relief bounce. The shorter the timeframe you trade the more likely it is you may want to explore the relief bounce.
Verdict: Technically the pair looks due for a relief bounce but the longer timeframe, and thus, the more established movements, suggest we’ve got room to the downside. So, why make the adventurous long play? Better wait for the relief bounce and fade it toward the bottom area of the daily chart.