The Weekly Update: Undivided Attention for GBP

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GBP Technical Analysis

It appears GBP (once again) is the key currency to gain our attention in the Foreign Exchange (Forex) market. The Sterling has been largely affected by the latest UK referendum polls that predict a narrow majority for the camp that wishes to remain in the EU.

The main currency pairs that suggest GBP is due for corrective gains are GBPUSD, GBPJPY and GBPCAD. We have decided to focus on GBPUSD and GBPJPY.

GBPUSD Monthly Chart

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GBPUSD Monthly Chart 10/04/16

GBPUSD Monthly Chart 10/04/16

GBPUSD Weekly Chart

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GBPUSD Weekly Chart 10/04/16

GBPUSD Weekly Chart 10/04/16

GBPUSD Trading Strategy

GBPUSD painted a classic Japanese reversal pattern in the monthly chart while the current dip provides a comfortable entry to the market. The monthly entry does not require us to wait for the monthly close but the trade may be in a profit at any time this month and possibly only in May, 2016.  GBPUSD may continue its retracement towards 1.3840 before reversing higher, which is why the protective stop loss order must be layered beneath 1.3840.  The size of the stop exceeds +300 pips, which is reasonable for a monthly entry but in light of our current market exposure we are uncertain if we wish to add over +250 pips to the potential drawdown.

The weekly chart shows a potential for reversed Head-And-Shoulders (H&S). The potential drawdown is approximately +100 pips as the support (in blue) may be re-tested by the market. We cannot determine whether a re-test will indeed take place so we must assume that it will.

GBPJPY Daily Chart

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GBPJPY Daily Chart 10/04/16

GBPJPY Daily Chart 10/04/16

GBPJPY Trading Strategy

GBPJPY affirmed a Japanese reversal pattern in the daily chart along with positive divergence across a number of technical indicators. The potential drawdown in GBPJPY is approximately +100 pips, which is acceptable bearing in mind the volatile nature of FX cross. 164.30  is the potential target if the Bank of Japan (BOJ) intervenes in the market but we are more than likely opt for a lower target.

Monthly charts signals tend to be firmer than daily charts. We are nevertheless favouring GBPJPY due to the positive divergence. If a weak JPY and a strong GBP are noted this week GBPJPY may enjoy strong gains in the Forex market. If GBPUSD will remain around current levels we have until the end of the month to take the long trade.

Due to our market exposure in USDCHF and USDJPY at the time of this writing we cannot take both GBPUSD and GBPJPY.  We will decide how to proceed after the opening of the Forex market. The key data this week is China Gross Domestic Product (GDP) q/q.

If the trade alert is taken it will be sent via email and then updated on this page with the chart we used to derive the trade alert.

GBPJPY Trade Alert Details

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GBPJPY Daily Chart II 10/04/16

GBPJPY Daily Chart II 10/04/16

GBPUSD entry is also fairly clean but we have decided to opt for GBPJPY, thus increasing our short net exposure to the yen. This trade increases our market exposure but we believe it can still be tolerated. It is the tightest stop we can use for GBPJPY. We are absorbing the current spread.

GBPJPY long at market price (152.51)
Take profit: 159.90
Protective stop: 150.00
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

11/04/16 UPDATE: GBPJPY is trading at 153.30 at the time of this writing. We are closing 20% of the long trade at market price as we would like to control our market exposure.

Please click on the chart to enlarge:

GBPJPY Daily Chart 11/04/16

GBPJPY Daily Chart 11/04/16

GBP moderate gains were lead by strong demand that was noted in GBPJPY.

GBPJPY latest partial realization was a risk management manoeuvre in order to contain our market exposure. Although we also had a long entry in GBPUSD we could not take the long trade as it would mean incurring excessive market exposure regardless of its outcome.

Please click on the chart to enlarge:

GBPUSD Weekly Chart II 11/04/16

GBPUSD Weekly Chart II 11/04/16

Risk management is above all.

11/04/16 UPDATE II: GBPJPY gains continue in the forex market, trading at 153.98 at the time of this writing.

Please click on the chart to enlarge:

GBPJPY Daily Chart II 11/04/16

GBPJPY Daily Chart II 11/04/16

We are closing 10% of the long trade at market price and shift the protective stop to the entry.

12/04/16 UPDATE: GBPJPY is trading at 154.57 at the time of this writing.

Please click on the chart to enlarge:

GBGPJPY Daily Chart 12/04/16

GBGPJPY Daily Chart 12/04/16

We are closing 10% of the long trade at market price.

12/04/16 UPDATE II: GBPJPY is trading at 154.94 at the time of this writing. We are closing 10% of the long trade at market price and shift the protective stop to 153.00. We are unlikely to realize more partials in GBPJPY unless strong gains are noted in the market, preferably over +200 pips.

13/04/16 UPDATE: GBPJPY protective stop is shifted to 154.28.

14/04/16 UPDATE: GBPJPY triggered the protective stop that was shifted above the entry, ending the trade with a decent profit.

The Weekly Update: Undivided Attention for GBP

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: Undivided Attention for GBP

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The Weekly Update: Undivided Attention for GBP

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The Weekly Update: Undivided Attention for GBP

Last Updated on April 17, 2016