To be honest, I don’t think anybody saw this coming when they came back from Memorial Day weekend. After the snoozefest we saw on Monday, GBP/JPY shot up the charts early on Tuesday as the yen took a hit to the midsection after Moody’s put Japan on downgrade watch. This sent yen pairs soaring, and saw GBP/JPY climb all the way up to 135.00.
It was all downhill from there though, as this lined up with the top WATR. GBP/JPY gave up all its gains over the next few days as poor economic data (U.K. manufacturing PMI) and risk aversion (U.S. ADP report) pushed the pair much lower. It eventually bottomed out just below 131.00 before recovering to close at 132.00 by Friday’s close.
Obviously, the clearest and easiest play here was to go short at 135.00, which lined up with the top WATR. Stochastic was also giving us overbought conditions, indicating that there were no more buyers left in the market.
We could have gone short at 135.00 and since we were picking a top, we could have used a tight stop of 50 pips. Had we rode this all the way down and aimed for the opposite WATR, we could have made nearly 350 pips. That’s a sweet 7:1 reward-to-risk ratio, baby! Can you Dirk it!?
Pretty simple trade eh? Did you make any pips off trading Guppy this week?