GBP/JPY Forex Trade Review

Forex Trade Review: 2014-04-23

Guppy took a fall during the Wednesday trading session thanks to a mix of broad risk aversion and sterling weakness.

Original Trade Idea: Rising Trendline Play on Guppy
GBP/JPY 4 Hour Forex Chart

GBP/JPY 4 Hour Forex Chart

It was the Chinese PMI data that–although coming in above expectations–is still indicating contractionary manufacturing conditions for the fourth month in a row.  The move to risk aversion started slow, but eventually got the safe havens (like the Swiss Franc and the Japanese yen) into rally mode throughout the Asia and London trading sessions. Later in the session, the BOE’s Monetary Policy meeting minutes showed a wide range of opinions in the U.K. economy, which forex traders took as a signal to lighten up on Sterling longs.

In my last trade update, I decided to adjust my stop higher to lock in profits as I did see signals the near 300 pip rally from 170.00 was losing steam.  And looking at the longer term chart above, it appears sellers were starting to take control at the newly formed trend line connecting the lower “highs” on the four hour chart.  With yesterday’s drop, I was stopped out at 171.50 for a small gain.

Total: +150 pips/ +0.25% gain

Despite catching a big move, it was a with a small position as I had planned for the support to be between 168.00 to 170.00.  I was looking to add more, but with Chinese data prompting forex traders to lighten up on risk, even this pull back to the 171.50 – 172.00 area is not attractive to me at this time.

Also, we’ve got significant Tokyo CPI data tomorrow that’s expected to show a rise in inflation.  If it does, that’s more fuel for traders who think the BOJ will continue to hold off on any new stimulus measures, which favors the Japan Yen.

I’ll keep a close eye on Guppy for now, as well as the Kiwi with fresh news of a rate hike from the Reserve Bank of New Zealand.  Stay tuned!