The Weekly Update: GBP and the JPY BOJ Trading Strategy

GBPCHF Trading Strategy

We are pleased with our decision to close all open trades prior to the weekend. If the military coup was successful in Turkey it would have injected heavy volatility into the market, resulting in substantial gaps at the opening of the Forex market. We are currently not expecting any unusual activity, crude oil and the Canadian Dollar (CAD) may face limited volatility.

We are continuing to pursue the Swiss Franc (CHF) and also cover the Japanese yen.  Last week we attempted to long GBPCHF via an entry order (buy limit), which was unsuccessful. The market missed our entry by a relatively small amount of pips before rising over +350 pips.  The recent dip lower may provide a fairly attractive entry.

GBPCHF Daily Chart

Please click on the chart to enlarge:

GBPCHF Daily Chart 17/07/16

GBPCHF Daily Chart 17/07/16

Classic reversed Head-And-Shoulders (H&S) has been painted on the daily chart. We should say that there are a number of entries in other GBP pairs and crosses that may suggest we are due to wit ness a strong GBP in the Forex market. We are favouring the Swiss Franc as the possibility for the Swiss National Bank (SNB) to re-initiate the floor in EURCHF is still present.

The main concern is the location of the protective stop loss order. Although the technical signal has been provided, GBPCHF may trade lower before reversing higher. The potential drawdown based on our analysis is approximately +100 pips.  There is no guarantee such a retracement will take place but it must be anticipated. What will certainly assist us is a gap lower at the opening of the market.

As it appears to be a strong GBP we may increase our exposure to the currency throughout the week.

USDJPY Strategy

As we updated all our subscribers via email, USDJPY as well as other JPY pairs and crosses posted moderate gains in the market, The market priced-in the probability of further easing by the Bank of Japan (BOJ) as well as a possible coordinated action by central banks to ensure the Brexit effects will be contained when Article 50 (A50) is activated by the new British Prime Minister.

We have discovered a technical conflict between the daily, weekly and monthly chart. When such a conflict is present many traders are likely to be lead astray by the chart.

USDJPY Daily Chart

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USDJPY Daily Chart 17/07/16

USDJPY Daily Chart 17/07/16

USDJPY Monthly Chart

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USDJPY Monthly Chart 17/07/16

USDJPY Monthly Chart 17/07/16

The daily chart may paint a reversed H&S on the daily chart. USDJPY will require to dip lower in order to re-affirm the left-hand shoulder. In the monthly chart (please note it is a weekly entry, it is easier to note the conflict on the monthly chart) is painting top H&S. We have been monitoring USDJPY neckline for several weeks. The challenging part of the monthly chart is that the initial monthly top H&S objective has been reached. By the book the price may continue trading higher. Nevertheless we are fairly convinced the current monthly H&S will force heavy selling in USDJPY.

The trigger is likely to be the BOJ monetary policy that is due next week. We are also weighing the possibility of a weak US Dollar that may be seen this week.

We are unlikely to opt for both trades at the beginning of the week unless USDJPY gaps +120 pips higher and GBPCHF gaps +100 pips lower.

The technical signal based on the strategies we provided will be emailed after the opening of the Forex market and then updated on the website.

USDJPY Trade Alert

Please click on the chart to enlarge:

USDJPY Weekly Chart II 17/07/16

USDJPY Weekly Chart II 17/07/16

USDJPY short at market price (105.34)
Take profit: 99.80
Protective stop: 107.20
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 18 days

Note: We are bearing in mind the price may re-test 106, which is priced into the stop. We could use a larger take profit but are aware of a possible coordinated action on such a steep decline in USDJPY.

GBPCHF Entry Order

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GBPCHF Daily Chart 17/07/16

GBPCHF Daily Chart 17/07/16

GBPCHF entry order (buy limit): 1.2825
Take profit: 1.3560
Protective stop: 1.2747
Risk Ratio (RR): 1 : 6 (approx.)
Estimated duration: 14 days

As we wrote in the weekly update, there are several entries in GBP pairs and crosses. From a technical angle a re-test is not guaranteed but as we decided to opt for USDJPY we will use an entry order in GBPCHF. By the book the chart has a number of days to trigger the entry but we may cancel the order if the entry is not triggered in approximately 24 hours.

24/07/16 UPDATE: Following a spike in USDJPY on reports (Reuters) the BOJ may expand its easing measures by JPY 20 trillion the protective stop loss order was triggered, ending the long trade with a loss. We are aware USDJPY has retraced most of its gains to trade back below 106.00 but we rarely re-enter trades that were stopped out. We will re-examine JPY pairs and crosses on Wednesday, prior to the BOJ monetary policy. GBPCHF did not trigger our entry order, which we have cancelled.

28/07/16 UPDATE: It appears that the Japanese government stimulus plan will only be approved next week. This means the BOJ monetary policy is irrelevant to the upcoming stimulus. It is therefore wiser for us to wait for the weekly close from a technical angle as well as from a fundamental angle. We will wait for the weekly close and avoid the intraday noise that will be triggered by the BOJ.

There are times it is best to stay off the market. We are aware the BOJ will have a significant impact on the market. The bearish trend (USDJPY) is still present but we cannot rule out large bullish spikes. The required stop exceeds +300 pips, which is not for us. Had the monthly close been today we may have seriously considered a short trade but this is not a monthly entry. We will attempt to capitalize over JPY on the monthly close, which is this Sunday, We will evaluate JPY as well as other currencies and opt for the pair that provides the cleanest entry.

29/07/16 UPDATE: USDJPY was heavily sold, we provided our reasons for not initiating a short trade in the pair yesterday.

Please click on the chart to enlarge:

USDJPY Monthly Chart 29/07/16

USDJPY Monthly Chart 29/07/16

The Weekly Update: GBP and the JPY BOJ Trading Strategy

As all trades are closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
The Weekly Update: GBP and the JPY BOJ Trading Strategy

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The Weekly Update: GBP and the JPY BOJ Trading Strategy

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The Weekly Update: GBP and the JPY BOJ Trading Strategy