The idea behind this trade (sell GBP/JPY
) is based on a trend continuation strategy paired with the use of correlation. GBP has been in a long-term downtrend against JPY, whilst the Yen has been relatively strong. The area circled in black, shows the defining areas of the market based on price action, and as one can see whilst there has been recent GBP strength, the area has not been breached. It looks like the market has started to turn on a shorter time frame and therefore it can be hoped to continue, especially considering the Brexit focus at current, possibly helping further GBP weakness.
Stop set above the candle which started the recent 'large' downwards movement.