GBPJPY Technical Setup: UK Budget and BOE

Aside the US Gross Domestic Product (GDP) figures, Amazon and Alphabet missed the earnings’ expectations, which contributed to some of the weakness we have seen in the leading US indices. The selling weakened the US Dollar in the Foreign Exchange market.

Reports on Friday suggested brexit negotiations were placed on hold as the UK cabinet struggled with how to continue the negotiations. These reports prevented GBP from climbing higher on Friday despite USD weakness. As AUDUSD corrected higher GBPAUD was pressed lower, erasing its gains that were seen due to a weak AUD.

The UK Government is scheduled to present its budget on Monday. The budget may have to be altered in an event no deal is made with the EU. Weekend reports also indicate a ‘Norway approach’ may be the way to proceed forward. The Bank of England (BOE) is expected to hold its monetary policy on Thursday.

The US midterm elections are due on 6 November, 2018. At the time of this writing the recent polls suggest the Democrats may seize control over the House of Representatives. We will have to wait until next week to begin assessing the potential impact of the elections on global markets.

GBPJPY 4hr Chart

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GBPJPY Technical Setup: UK Budget and BOE

GBPJPY 4hr Chart 28/10/18

We have noted a potential entry in GBPJPY during Friday’s session. As the price began correcting higher prior to the 4h4 close we decided to remain on hold. The potential drawdown is a re-test of 142.60, which is fairly high bearing in mind the odds of such a re-test are currently high.

Opting for GBPJPY will also increase our exposure to GBP as we are already holding a long trade in GBPAUD. The trade is currently under-performing as AUD climbed higher on Friday while GBP remained in a tight range.

The Bank of Japan (BOJ) is expected to hold its monetary policy later this week. Some BOJ members have already expressed their concerns with the loose monetary policy, however, the BOJ stated it has no plans to end the current Quantitative Easing (QE) program.

We are uncertain whether the potential entry in GBPJPY is linked directly to GBP as we are noting weak entries in other JPY pairs and crosses. GBPJPY and CHFJPY may provide the firmer entries but we are not holding long CHF positions until the SNB normalizes its current interest rate.

GBPJPY Trade Alert

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GBPJPY Technical Setup: UK Budget and BOE

GBPJPY 4hr Chart III 28/10/18

GBPJPY long at market price (ask 143.55)
Take profit: 146.60
Protective stop: 142.17
Risk Ratio (RR): 1: 2.2 (approx.)
Estimated duration: 8 days

Relevant as long as GBPJPY is below 143.95

Note: The potential drawdown is a re-test of 142.60. The odds for some drawdown is high but it can be easily absorbed. The UK budget is due Monday but we suspect it may be linked to a weak JPY.

31/10/18 SIGNAL UPDATE: We are shifting GBPJPY protective stop to 143.29.

USDJPY Trade Alert

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GBPJPY Technical Setup: UK Budget and BOE

USDJPY 4hr Chart 31/10/18

USDJPY long at market price (ask 112.97)
Take profit: 114.25
Protective stop: 112.34
Risk Ratio (RR): 1: 2.0 (approx.)
Estimated duration: 72 hours

Relevant as long as USDJPY is below 113.15

Note: This is a 4hr entry. The potential drawdown is a re-test of 112.65. In an event we will be too close to the market prior to the US Non-Farm Payrolls we will have to be provide more room for the trade.

01/11/18 SIGNAL UPDATE: GBPJPY gains are stronger than we have anticipated. Part of the gains are related to the brexit negotiations. When strong gains take place it is often followed by some retracements, which we are unwilling to incur.

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GBPJPY Technical Setup: UK Budget and BOE

GBPJPY 4hr Chart 01/11/18

GBPJPY is trading at 145.77 at the time of this writing, we are closing the long trade at market price.

02/11/18 SIGNAL UPDATE: We lack a sufficient distance from the market at the time of this writing. If we wish to remain in the trade the protective stop must be shifted due to the spread widening that may be seen when the US employment figures are released.

We are unwilling to shift the protective stop, partially due to the fact it is a 4hr entry where the corrective gains should have already materialized

USDJPY is trading at 112.87 at the time of this writing, we are closing the long trade at market price. We are aware the price may spike higher but we do not wish to shift the protective stop. If we do not shift the protective stop and the price spikes lower the stop loss order may not hold, which may result in slippage.

All of the above trade updates on this page were issued via email to our members.