Before we get the ball rollin’, I suggest y’all read my introductory post on the Weekly Winner to refresh your memory on my trading framework. Done? Cool, let’s get started!
June 6 to June 10, 2011: GBP/JPY Price Action Review
Oooh baby! GBP/JPY had about as many twists and turns as the Dallas Mavericks vs. Miami Heat series! One day the pound would be in control, and the next, the yen would have the reins!
During the first half of the week, the IMF‘s concerns about U.K. growth and a downgrade warning kept the pair from rising above 132.00. But for some reason, the pound was always able to bounce back up after these setbacks. I suppose traders didn’t want to choose sides ahead of the BOE’s rate statement.
Not surprisingly, it was the BOE‘s rate statement that finally sealed the pound’s fate. Just as they had reacted in the past, traders got all bearish after the BOE’s refused to hike rates. This, coupled with weak U.K. data and general risk aversion on Friday, is what led GBP/JPY to close below the previous week low.
The best thing to have done on this week was short in the resistance zone I marked out in the area around the WO and 132.00 major psych handle. We actually could’ve anticipated a range-bound environment ahead of the BOE statement and simply played the range for a couple of quick 2:1 setups.
Use a 50-pip stop, short at 132.00, aim for 131.00… Boom! Money! We actually had two clear chances to play the exact same setup.
Yeah, it sort of sucks seeing these setups so clearly after they materialized… As they say, hindsight is 20/20. But we gotta keep doing these reviews so we can spot these setups as they materialize in the future. Ya dig?
Anyway, we’ve got a fresh week ahead of us, and that means more trading opportunities to come! If you’ve got any trade ideas you’d like to share, hit me up with some comments below! Peace out!