Cross-Eyeing: GBP/JPY Support at 119.00 – Orders Cancelled

Orders Cancelled: 2011-10-13 02:02

GBP/JPY 1-hour chart

The markets reacted positively to developments regarding European bank recapitalization, as well as to news that Slovakian political parties were able to agree to a deal regarding EFSF changes. This sparked a wave of risk taking in the markets, allowing higher-yielding currencies to dominate the dollar and yen.

As a result, the pound trampled all over the yen, rising over 200 pips before topping out at the 122.00 MaPs. Unfortunately for me, I wasn’t able to hop on the Guppy train and I missed the whole move!

Looking back, one way I could have caught the move would have been to go long when a doji formed right above the weekly open at around 119.22. Though I do think that entering there wouldn’t have given me the ideal reward-to-risk ratio that I would have wanted. Besides, it’s not like I knew the pair was going to bust past the 120.00 MaPs so easily!

Hopefully, most of you had better luck than I did. If you caught the move, congratulations! Now how about buying your favorite one-eyed monster a drink at the nearest pub to help him drown his sorrows?

Trade Idea: 2011-10-12 02:40

GBP/JPY 1-hour chart

We saw a crazy risk rally in the past few days that led GBP/JPY to climb above the 119.00 major psychological handle. Now that price is above this former support and resistance level, I think there’s a good chance we’ll see it reprise its role as a support area. As you can see, crossing this major psychological handle has not been easy in the past. Why should it be any easier now? I say we’ll probably see another bounce before this bad boy breaks!

Furthermore, if you take a look at the 4-hour time frame, you’ll see that there’s a potential double bottom formation in the works. As you all know, this is widely considered a bullish pattern. Sounds like a good buy, right?

But this trade is not without its risks. Later today, we have some big U.K. reports coming out. Employment data will be available, and judging by the U.K.’s recent PMI numbers, there’s a chance that it may be disappointing. But to be honest, even if the employment reports do show weak numbers, I don’t think it’ll have a lasting effect on the pound. Risk appetite has been relatively healthy lately, and I think that should help prevent it from falling any further.

Besides, if the pound managed to rise above 119.00 in spite of the fact that the BOE expanded its asset purchase facility, it should at least be able to hold its ground with weak employment data, right?

In any case, here’s how I set up my trade:

Buy GBP/JPY at 119.00, stop loss at 118.40, profit target at 120.00.

I’m only risking 0.50% on this trade since it involves a bit of event risk.

What do you guys think? Anyone willing to join me?

  • nunezdiddy

    hye man…agree with you..however, i can’t hold myself..go for long at 119.60..hope it will work for me this time..

  • Amal Nafi

    I trad ewith sunbirdfx they give me signal for buy make 100 pips  and I left the position opened..what you recommend?

  • guest

    Late to the party, here (power outage) so I see htat you’ve made the trade. Great! I do see a bearish divergence with the stochastic (StochFull 10,3,3 – 4H chart)… might it be worth holding out for 123 or 124?

    • guest

      errr… bullish, I meant to say…

      • cyclopip

        Unfortunately I didn’t quite get triggered on this one, which kinda stings a bit since the pair rose nearly 300 pips yesterday!

  • Ossy

    Saw this posting late…however if i was to trade this i would trade it on the buy cos i agree on that what ever the news is it would not have a lasting effect….i missed this trade…feeling bad right now

    • cyclopip

      Tough luck for us, we both missed out. One of those times where a missed trade hurts as much (if not more than) as a losing trade.

  • Forex Vendetta

    Nice double bottom on daily huh m8 ;) I’m trading pound so both genrally move in same direction, good luck with ya trade bud :))

    • cyclopip

      Congrats Forex Vendetta! Happy to hear that you caught the awesome move. Have you taken profits already?