The Weekly Update: Anticipating GBP FX Volatility

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GBPJPY Technical Analysis

With the UK referendum due in June 2016 GBP volatility is likely to remain high in the Foreign Exchange (Forex) market as the latest polls may have a significant impact on the currency.  Although we had a technical entry to long GBPAUD and decided to dismiss the trade as we were already holding a short trade in AUDUSD and did not wish to expose ourselves to the negative interest, we are suspecting GBP is poise for moderate gains against a basket of currencies.

Selecting the desired currency pair was a difficult task but we have decided to opt for GBPJPY.

GBPJPY Daily Chart

Please click on the chart to enlarge:

GBPJPY Daily Chart 27/03/16

GBPJPY Daily Chart 27/03/16

Although we chose to display the daily chart the entry is also supported via the weekly and monthly chart. The imminent pattern that is noticed is the top Head-And-Shoulders (H&S), which suggests further weakness in GBPJPY. However, the broader image that is derived from the daily chart is reversed H&S where the recent dip provides a neat entry to the market. What leaves room for concern is the possibility of 158.40 being re-tested by the market or perhaps a deeper re-test of the latter support (lower blue line).

We cannot predict whether such re-tests will indeed occur or whether the price will extend its gains as expected. We do not believe is exercising excessively large stops despite the anticipated Return on Investment (ROI). The alternative is to exercise an intraday stop for the long trade with the possibility of re-entering the trade if the protective stop loss order is triggered by the market.

GBPJPY 4hr Chart

Please click on the chart to enlarge:

GBPJPY 4hr Chart 27/03/16

GBPJPY 4hr Chart 27/03/16

We hope for a bearish gap at the opening of the Forex market that will reduce the protective stop loss order’s size and enhance the risk ratio.

The latest polls for the UK referendum suggest the camp that wishes to remain in the EU still has a majority but many are currently undecided. One must bear in mind that exiting the EU will increase the UK Gross Domestic Product (GDP) by as much as 3% – 5%.

As the technical strategy greatly depends on GBPJPY opening price we will issue the trade alert after the opening of the Forex market.

27/03/16 UPDATE: We are waiting for the spread to stabilize. If due to the holidays the spread will remain significantly wider we will not be issuing a trade alert. We will send another update within the next 60 minutes,

27/03/16 UPDATE II: Although we are considering a long trade we choose to remain on hold due to the spread.  We will revise GBPJPY during the European and US session and decide whether a long entry is still possible, taking the spread into account. We would require a significantly lower price in order for us to absorb the spread. We will not issue trades under the current market conditions.

28/03/16 UPDATE:  GBPJPY spread has stabilized but over +50 pips gains were noted following our 4hr entry. We cannot enter the market at such high levels. If GBPJPY will extend its gains in today’s session we may have no choice but to focus on a different currency pair.

28/03/16 UPDATE II: GBPJPY extended its gains in the market, trading at 160.91 at the time of this writing.

Please click on the chart to enlarge:

GBPJPY_4hr_Chart_II_28_March_2016

As you may note GBP gained against a basket of currencies as we have anticipated. Due to the widening to of the spread we chose not to enter the market. The recent gains will not allow us to enter GBPJPY, which means we must dismiss the the trade. Even if the price corrects lower it will be difficult to re-establish a valid technical entry.

The Weekly Update: Anticipating GBP FX Volatility
As GBPJPY trading strategy is no longer applicable this page can now be accessed by all traders. Open trades are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
The Weekly Update: Anticipating GBP FX Volatility

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The Weekly Update: Anticipating GBP FX Volatility

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The Weekly Update: Anticipating GBP FX Volatility