It was a brutal day for the Japanese Yen, most likely sparked by the disappointing economic data from Japan during the morning Asia session. Needless to say, this was not good for my Guppy short idea.
Original Forex Trade Idea: Fading the Guppy Rally
It’s easy to see on the one hour chart above of GBP/JPY that the technical arguments for the bears to step in couldn’t withstand the fundamental drivers that appeared in today’s trade. Again, it was mostly the weak Japanese data (weak Machinery Orders and PPI) that sparked a harsh Yen sell off, but also a new poll out of the U.K. today that showed support for Scotland to leave the U.K. was fading. So, it was a complete 180 degree turn in terms of the drivers that supported my short idea and taking me out of my small position at 172.52, where my stop was triggered.
Total: -150 pips/ -0.50% loss
Today’s small hit was a reminder of how the story can change quickly on ya, and why stops are important, especially for playing shorter-term plays. I’m glad I went with a small position on this one, and will continue to do so in the near term as I continue to observe the changes in the market environment (e.g., rising market volatility and shifting market drivers). I’ll probably stay away from Sterling until after the Scottish referendum vote next week, and focus on the downtrends in the Japanese Yen and Australian Dollar. Stay tuned!