The Weekly Update: GBPJPY and the Bank of Japan

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GBPJPY Technical Analysis

Issuing a trade alert ahead of the Greek elections results is a difficult task but we will provide our strategy and hope for a bearish gap that will allow us to enter the market. We have mentioned in our past trading strategies that the Bank of Japan (BOJ) may expand its Quantitative Easing (QE) program at the end of October 2015. Many traders that are aware of the possibility for a QE expansion by the BOJ may choose to wait for October in order to consider their trades in the Japanese yen (JPY).

From our experience the market often prices-in the probability before such an announcement is made, especially in regards to QE or any changes to the current monetary policies. Although the yen may weaken against a basket of currencies we are avoiding EURJPY and AUDJPY. The Euro is exposed to unnecessary volatility as we do not see any political party in Greece garnering a sufficient majority to form a government, which often leads to a second round of elections. We are also receiving mixed signals in AUD pairs and crosses including AUDJPY, which will also be avoided.

GBPJPY Trading Strategy

That leaves us with several currency pairs. After analysing the Forex market we have decided to opt for GBPJPY.

GBPJPY Daily Chart

Please click on the chart to enlarge:

GBPJPY Daily Chart 20/09/15

GBPJPY Daily Chart 20/09/15

GBPJPY 4hr Chart

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GBPJPY_4hr_Chart_20_September_2015

We noted the potential for reversed Head-And-Shoulders (H&S) on the daily chart where the neckline was successfully tested by the market. In addition, we have also noted the higher high’s and lower low’s, which suggests we are in the midst of an uptrend. There are multiple layers of support levels as you may see from the daily chart. A safe region for the protective stop loss order may be below 184.00, which we oppose as there is little need for a stop for the long trade. If we truly believe such a stop is required we would wait for a lower price in order to establish the long trade that will enhance the risk reward ratio. The target for the long position is 192.10, however, if we note GBPJPY is stalling around 190.55 we may choose to exit the same assuming we have correctly anticipated the uptrend.

The 4hr Chart shows the possible intraday stops we may use for GBPJPY. Opting for intraday stops often bears a greater risk but on certain occasions it is a risk we are willing to take based on our trading strategy. As the markets are closed the opening price of GBPJPY will determine the location of the stop. A gap higher will be challenging, our preference is for a gap lower that will provide us with a healthy risk reward ration. The trade alert details will be sent to you via an email after 21:00 GMT. The estimated duration for the trade is also challenging in light of the key economic events this week as our target may be acquired in several days. We will base the estimated duration on the daily chart, which is 24 days.

GBPJPY Trade Alert Detials

We did not have a bearish gap, which is why we are opting for a tighter stop based on the 4hr chart. We could see a retracement to 186.24 but we will absorb it should it occur.

Please click on the chart to enlarge:

GBPJPY Current 4hr Chart 20/09/15

GBPJPY Current 4hr Chart 20/09/15

We are executing a long trade in GBPJPY at market price (186.42)
Take profit: 192.10
Protective stop:  184.56
Risk Ratio (RR): 1 : 3 (approx.)
Estimate duration: 24 days

21/09/15 UPDATE: GBPJPY is trading  186.86 at the time of this writing. Bearing in mind this cross can easily trade over 150 per day today’s price movements were fairly limited. We cannot shift the stop to the entry as we are too close to the market.

Please click on the chart to enlarge:

GBPJPY 4hr Chart 21/09/15

GBPJPY 4hr Chart 21/09/15

We are nevertheless closing 10% of the long trade at market price to downsize our exposure.

22/09/15 UPDATE:  GBPJPY cracked 185.25, which paints a different picture. We are preparing for the possibility of being stopped out on the long trade. Out last line of defence is 184.73. We must admit we are surprised by the intensity of the trades adjustment.

22/09/15 UPDATE II: Although 184.73 initially held, the price broke below after multiple attempts, triggering the protective stop loss order. We were able to downsize the trade by 10%

The Weekly Update: GBPJPY and the Bank of Japan

As GBPJPY long trade is closed 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: GBPJPY and the Bank of Japan

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The Weekly Update: GBPJPY and the Bank of Japan

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The Weekly Update: GBPJPY and the Bank of Japan