It has been long time since I took a more detailed look at the beast. On these pages, that is. This pair, GBP-JPY, is mentioned here very often, although longer term analysis has not been done in a while. Due to this relatively out of proportion coverage, as compared to other currency pairs, I have often been asked if this is my favorite cross to trade. Answer is, no. But some years ago it was, together with USD-CHF. Unfortunately, my favoritism towards the beast was based on potential returns, it moves a lot, rather than actual results. I had hard time making consistent profit. In retrospect, I think it was because I was trying to predict and catch every move and turning point, instead of focusing on high probability set ups and waiting for them.
Early in the year I had a post devoted to the long term moves of the beast. That view played itself out, the objective was met, so I’m going to sketch out some of my views on possible next developments. There were some shorter term opinions expressed since, but all those scenarios came to largely positive conclusion. New analysis are needed. The previous one, using weekly chart called for GBP-JPY to be back in 160’s area by the summer. While this has been accomplished, one smaller part of that analysis has not happened yet.
Those of you who read some of these posts, know that I use 100SMA as a trendline. Also, for any longer term view, it can be used as a pivot, around which price oscillates. No mater how far away from this line action takes us, it is only a matter of time before price will gravitate towards this line, first touching it and then crossing and moving on to the other side. BTW, there is nothing magical about 100SMA, anything can be used. One simply has to spent enough time to watch and learn what happens around a chosen medium. My point is, that price of GBP-JPY has not pulled back up to 100SMA. Yet. If GBP-JPY long term recovery is to continue, which I think it will, reaching this level should be next.
It is difficult to happen, where and this would happen, it depends on time. The longer it takes, the lower 100SMA moves, dragging the “meeting point with it. However, as of right now, 172-3 level is very reasonable, or about 1000 pips from nearest high. Given the fact it is already August, my time target for that would be October-November. Any sooner is a bonus. When, and if, that is reached, I expect price to move back and forth a little bit across this line, before resuming an uptrend. That leg will have a target of 195 or so, the next important resistance level, but that is in a relatively remote future and will have to reviewed depending on what the market does.
As of right now weekly chart doesn’t present any good trading opportunity. From my point of view next longer term entry must chosen using daily charts. And this brings us to current situation.
Price of GBP-JPY is showing a possible double top. This indicates retracement, sell off of some magnitude, and is common to all Yen pairs at the moment. It was covered in greater detail in last post. Since I already have a short position in CAD-JPY using this time frame and an order to get into AUD-JPY if the price drops, no trades of daily chart are planned for the beast. That said, if JPY surprises me here and just continues to get weaker, I want to get in above last highs, around 163 and try to to ride it to 172-73. Should this pair move down I will be looking long entry at 154 or so using either daily or 4H chart. Situation at the time will decide which one to use.
For trades to the down side smaller time frames should be used. Intermediate term, 4H chart, doesn’t look all that interesting at this time, but 1H graph migh present decent opportunity- should the price fall indeed, that is.
This chart is building a complex topping pattern, something I wouldn’t normally be interested in. Given larger picture, though, this is not bad. price fell over last few hours, establishing support around 160. I want to see a bounce from here and then another run at it. If 160 goes then, chances are good for a 200 pips directional move. I must stress again, that this is a relatively minor play within a far larger bullish outlook. It is a little complicated, but I makes sense to me, until proven wrong or price development makes me change my mind. After all, I’m flexible. This is seconadry, longer term charts take priority.
Mike K.
Interesting, Mike. Do you really think 195 is possible in the forseeable future? It doesn’t seem plausible. Then again, falling from 250 to 120 was also unbelievable.
Hello,
First of all, congratulation on job well done. The efforts you put into these pages are very appreciated. I’ve been trying to learn about Forex for some time. Bought all kind of books and course, probably caused an information overload. Never could put it together in some coherent fashion. Even though I don’t quite understand your methods, trade selection, but the way you go about placing a trade and how you explain things, are very very helpfull. You wrote somewhere that patience and dscipline are the most important parts of trading. Well, following this blog builds them up. I find it much easier to decide on what to trade and to analyze markets. Hope to be able to follow these pages for a long time.
Mike, could you respond to the email I sent you? At your convenience, of course.
Thank you Norm. it takes some time and even then one isn’t right all the time.
Damian, sure, no problem.
The Beast, aka 800 Pound Gorilla, is and has been tied to the equities market for years. If this model holds, I expect him to regain the 250 handle within one (1) year, as equities continue to rise. Bull market, folks. Heard that only 10% of the stimulus has hit the streets. If true, we’ll continue to get positive surprises such as today’s NFP. Next major resist @ 168, the top of the weekly Ichi Cloud.
Buy the dips!
250 in a year? Maybe a little too optimistic. But then again- why not? After all I expect to see 400 evntually, not sure when though. For now one step at a time for me.
[…] moving to current time and chart of GBP-JPY. Action in this cross was very similar to CAD-JPY yesterday. Due to my long term bullish bias […]
If you go back through the thread, you’ll notice that I didn’t jump in until it was well into full gear. ,