October 31 to November 4, 2011 – GBP/JPY Price Action Review
Halloween turned out to be quite eventful for the markets, as the Bank of Japan finally made good on its promise to intervene. The BOJ intervened in the currency markets, causing all yen pairs to soar up the charts. GBP/JPY rose a solid 500 pips before finding resistance at 127.00.
The pair then traded lower as risk aversion weighed heavily in the markets thanks to Greece PM George Papandreou’s call for a referendum. This helped the yen buck some of its losses, which led GBP/JPY to fall to 124.00.
This area turned out to be a solid support zone as GBP/JPY bounced right off it and traded higher for the rest of the week on improved risk sentiment.
As I pointed out on my trade last week, the setup was as clear as a zit on my forehead. Not only was 124.00 a major psychological level, but it also happened to line up with the 61.8% Fibonacci level. A bullish divergence formed as well. With so many signals to buy, it’s easy to see why I didn’t hesitate to take this GBP/JPY trade and enter at market.
If you had spotted this level earlier, you could have set an order to buy at 124.00, with a 40-pip stop. Aiming for the 125.00 handle (which was an area of interest earlier in the week), you could have gone home with a 100-pip win, equivalent to a 2.5:1 RR trade.
Not bad for a pretty choppy week for the cross-currency pairs!
Did you catch this beauty on GBP/JPY last week?