Daily Technical Update
January 06, 2010 (GBP/JPY)
Throwback Confirmed; Assessing Targets and Reward-Risk Ratio.



* Daily: The reversal of the GBP/JPY pair yesterday was indeed just a throwback as today’s return to the rally confirms. (Refer to Daily Technical Update 1.05.2010 GBP/JPY). The 146.00 area remained as support in the Asian session and the market has climbed to 148.00 by the start of the US session.
* Looking at the 4H time-frame, we can see very clear bullish engulfing pattern suggesting bullish reversal. The stochastic is showing some start of bullish momentum. This suggests we may have one more swing to test our resistance areas, the 153.00 area being one of them.
* Looking at the 1H time-frame, we can see a more conservative target (T1) at the 149.00 area (61.8% retracement). The (T2) is the 150.70 area, which is about 100% retracement back to the double top. Finally, the aggressive target is at 153.00, between 150% and 161.8% expanded retracement.
* From these targets, the medium one has a reward to risk ratio of 1.86:1, using 3xATR methodology to define stop-loss level, which would be about 144.65. This also assumes, the trigger at 146.85, a break from the double bottom at 146.00.
* In the near-term, we do see that the 1H stochastic is overbought, and we are testing a powerline at about the 148.00 area.
* Also in the near-term, we may have some resistance at the 149.00 target since this would spell the completion of a bearish gartley.



FXTimes.com
Fan Yang
Currency Analyst
Commodity Trading Advisor


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