GBPJPY—near triangle top

GBPJPY broke downward from its symmetrical triangle and then rebounded where it has now touched the top triangle line (133.75). The triangle is drawn in red lines on the chart below. As I wrote yesterday, you could expect fake-outs before a definitive break. On the three-hour chart, the pair just completed a doji candle and this could be the second candle of what will eventually become an evening star formation.

With triangles it's generally true that the closer price action gets to the apex the less significant subsequent moves will be. In addition, we're in the illiquid August market. So while a short with a tight stop would not be unreasonable, a lot of caution is warranted. If the pair breaks cleanly above 134.08, then prices may continue upwards. This could be the C leg of an ABC overall correction so again, any short positions would want that stop nearby. It's also possible the pair is going to stay in a sideways range with possibility of price ranging from 132.39 to 134.83.

Here's the three-hour chart:












© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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