GBP/JPY: Good risk-reward for the contrarian bears
Looking for extremely over-bought or over-sold conditions can be a very profitable exercise in the FX market. Of course there are plenty of false alarms but if you trade them properly, these signals can be very profitable.
Even though I’m a medium term GBP bull, the short-term signals are looking increasingly bearish but as yet we don’t know whether this means a period of consolidation or a retracement.
If it’s ‘bang-for-your-buck’ that you’re after, then GBP/JPY might be a good choice. It’s risen almost vertically at times and if/when it turns south, the move is likely to be similarly sharp. Selling near present levels at 167.50 with stops above 168.50 and a target at 164.00 looks like a reasonable proposition to me.