Forex Trade Review: GBP/JPY Bearish Divergence

So much for a Guppy selloff! The pair barely made it to the previous lows before risk-taking took place in the forex arena last week. If you’re wondering what I’m talking about, make sure you check out my short GBP/JPY forex trade idea first.

I had already shorted at market prior to the release of the U.K. CPI and when the results came in stronger than expected, I decided to cancel my second entry order around 167.00. Soon after, the employment report indicated a significant drop in wages while the retail sales figures also missed expectations, giving me more reason to keep my short position open.

GBP/JPY 1-hour Forex Chart

GBP/JPY 1-hour Forex Chart

However, the market’s mood shifted towards the end of last week, as the prospect of additional stimulus from the ECB and the quick bounce in crude oil spooked the pound bears and spurred short-covering. Because of that, GBP/JPY surged past the falling trend line and Fibs, climbing all the way up to hit my stop at 169.50 in the process.

In retrospect, I probably should’ve trailed my stop to breakeven or just closed early as soon as price bounced close to the previous lows. At that time, I guess I was still keeping a strong bearish bias on this pair and hoping that risk aversion would return sooner or later. Then again, I think I’ll still give myself a pat on the back for deciding to cancel my second short order when I started having doubts that the downtrend would resume.

Here’s how it turned out:

P/L: -300 pips / -0.25%

I’m pretty disappointed with myself for not being able to cash in on at least a part of the profits with this short-term forex setup, but I’ll just chalk this up to another lesson learned when it comes to being flexible and adjusting to sudden shifts in market sentiment. I’ll keep this in mind when taking setups this week, that’s for sure. Got any tips?

 

 

  • Cyclopip

    Bahh, yeah I’m pretty frustrated about this one too, knowing that UK fundamentals have been bearish for the pound. It’s just too bad that I hopped in the selloff right at the bottom.

    Maybe it’s time we look for a much higher correction on the longer term charts? What do you think?

  • forzion

    So we had some surprise from BoJ. We can get higher and I consider to enter around 180.00 where was previous support

    • Cyclopip

      Looks like resistance at 175.00 is holding for now. How do you think the BOE events this week will affect this pair?

      • forzion

        Risk aversion is the main driver now. I am cautious with this because of there is possibility for surprise. If there will be no special surprise I think that GBP cannot stand against JPY in this enviroment. So I am watching now and waiting for at least one more higher high (fractal) in daily time frame because I do not want to enter too early.

        • Cyclopip

          Good points! I’m also waiting for more confirmation myself, even as the nearby technical levels are holding up really well. Let’s see how this goes!