Thanks to the recent upward revision in the BOE’s growth and inflation forecasts, combined with the BOJ’s easing bias, GBP/JPY has been climbing up the charts and trading above a rising trend line on the 1-hour time frame.

However, the weaker than expected UK CPI released this week triggered a bit of a selloff for this pair. It is currently testing the rising trend line, which coincides with an area of interest. The 170.50 minor psychological level used to be a resistance area and now it might act as support.

Stochastic is almost in the oversold region and making its way out so a bounce might be in the works. If that’s the case, the pair might climb back up to the previous highs around the 172.00 mark or make new ones.

Going long at market with a stop below 170.00 and an initial target of 172.00 could make a 2:1 return on risk. Aiming for new highs could improve the reward potential while trailing the stop could help protect profits.

By Kate Curtis from Trader’s Way