Cross-Eyeing: Downtrend on GBP/JPY – Trade Closed

Trade Closed: 2011-09-27 2:48

GBP/JPY 1-hour chart

Sometimes momentum is just too strong, and that’s exactly what happened last week! I missed out on my GBP/JPY entry as risk aversion kept the pair from making a substantial pullback.

With equities and futures dropping like Kevin Durant 3-pointers, high-yielding currencies like the pound got burned on the charts. GBP/JPY fell throughout the Tokyo and London sessions, falling almost 200 pips before finding a bottom at 117.00.

Pretty frustrating as I got the direction right, but the markets just wouldn’t let me get triggered!

So, tough luck for me, as I missed out on a great move down. But hey, it happens. I gotta get over it! Congratulations to those of you who caught that move!

I ain’t too sure if we’ll see another sharp drop this week, but I’ll keep my one eye peeled for those high-probability setups. Peace out!

Trade Idea: 2011-09-22 3:08

I almost spat out my breakfast bunny leg when Big Pippin informed me about this sweet little setup on GBP/JPY this morning. It’s exactly what I’ve been looking for!

GBP/JPY 1-hour chart

On his Daily Chart Art, Big Pippin pointed out a falling channel on GBP/JPY’s 1-hour chart, highlighting the pair’s downtrend. But there’s more to this setup than that. I pulled up my weekly lines and used the Fib tool to take a closer look at this bad boy, and guess what I saw? A big fat sweet spot right around 119.50!

As you can see, the former support and resistance zone around 119.50 lines up perfectly with the bottom WATR, the 50.0% Fibonacci retracement level, and the falling trend line. It doesn’t get any sweeter than that! Or does it?

It does!!! This trade makes perfect sense since fundamentals call for a weaker pound as well. Yesterday’s MPC minutes suggest that it may not be long before the Bank of England calls for more quantitative easing. Of course, we all know from the School of Pipsology that this could lead to a weaker pound down the line.

With so many reasons to short GBP/JPY, I decided to set up my trade this way:

Short GBP/JPY at 119.50, stop loss at 120.10, profit target at 118.50.

Basically, I’m hoping that price will pull back to 119.50 before it continues south. I placed my stop above the trend line and the 120.00 MaPs to be safe, and I’m aiming for the previous low at 118.50. As usual, I’m only risking 1% on this trade.

What do you guys think of this setup? Hit me up with some comments below or on Facebook and Twitter. Peace, hommes!