GBPJPY may Correct Lower Within the Next 48 Hours

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GBPJPY Technical Analysis

The Bank of Japan (BOJ) easing measures have triggered a mass-yen selling across the FX board. To understand what caused the heavy JPY selling,  the Government Pension Investment Fund (GPIF) doubled its overseas equities from 12% to 25% and the international bonds purchases from 11% to 15%. Many traders have increased their net short JPY in the Forex market, leaving room for a heavy profit realization should risk-aversion resurface or a firm resistance level is encountered. We have failed to unearth such technical entry in USDJPY, however, we have discovered a decent entry in GBPJPY with a decent Return on Investment (ROI) and fair Risk-Ratio (RR).

GBPJPY Daily Chart

Please click on the chart to enlarge:

GBPJPY Trading Strategy 03/11/14

GBPJPY Daily Chart 03/11/14

 Following the moderate gains in GBPJPY, it is no wonder the technical indicators such as the Stochastic Slow overbought.  What is attracting out attention however is the negative divergence that may be affirmed at the daily close. Such a technical event paves the way for moderate technical correction to the recent gains in the FX cross. Our trading strategy is to execute a short trade near the upper resistance (upper black line) at 182.70. However, recent gains at the time of this writing has lifted GBPJPY to trade at 182.45. We therefore execute the short trade at market price and absorb any further gains towards 182.70. The protective stop loss order is layered at 183.47, targeting 178.86.

We are likely to be one of the few that believe a retracement is imminent within the next 48 hours. The RR is approximately 1:3, ensuring the short trade is inline with our risk management. The trade will be updated at the bottom of this page. Bookmark this page or subscribe to DDMarkets.com to be updated on the latest trade alerts in the Forex market.

GPBJPY Trade Details

GPBJPY short @ market price
Take Profit: 178.86
Protective stop: 183.47
Estimated duration: 7 days
Risk Ratio (RR): 1 :3 (approx.)

We will continue observing GBPJPY daily chart, revise our technical analysis and post updates regarding the trade alert when found relevant.

04/11/14 UPDATE: As we have expected, GPBJPY is trading at 181.57 at the time of this writing following a soft construction PMI figure. We are closing 30% of the trade at market price and shift the protective stop to the entry.

05/11/14 UPDATE: GBPJPY triggered the protective stop loss order, we have shifted to the entry. We were able to realize 30% of the short trade before the stop loss order was triggered. We will revise GBPJPY to determine when re-entry is possible.

GBPJPY may Correct Lower Within the Next 48 Hours
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GBPJPY may Correct Lower Within the Next 48 Hours

                                             GBPJPY may Correct Lower Within the Next 48 Hours

GBPJPY may Correct Lower Within the Next 48 Hours