A classic reversal chart pattern has formed on GBP/JPY’s 1-hour time frame, indicating that the recent selloff is almost over. However, the pair has yet to make a break above the neckline of the formation before a rally is confirmed.

Take note that stochastic is already in the overbought zone and looks ready to cross down, which means that a bit of consolidation or pullback might be in the cards before an actual upside break.

Going long above the 166.00 major psychological resistance with a stop around 165.00 or lower and a target of 200 pips could make close to a 2:1 return on risk. Bear in mind that the chart pattern is roughly 200 pips in height, which suggests that the potential breakout could be of the same size.

By Kate Curtis from Trader’s Way