We’ve got a major catalyst comin’ right up for the pound pairs today so I’m looking at this potential short-term trade on GBP/JPY. Tell me what you think!
GBP/JPY Trade Idea
The U.K. preliminary GDP reading for Q3 is expected to print a 0.3% growth figure, slower than the earlier 0.7% expansion and likely enough to keep the annual rate at 2.1%. However, my gut tells me that we could see an upside surprise given how industry PMIs and retail sales reports turned out for the July-September period.
If so, Guppy could bust out of its tight channel formation visible on the 1-hour time frame. I’m expecting a bit of volatility right around the release since traders might be closing out their previous positions ahead of the event or eagerly hopping in based on their biases. I’ll be on the lookout for a chance to go long around the channel support areas or on a break of the resistance, which lines up with the previous week high.
I chose to play this bullish pound bias against the yen because, as Forex Ninja noted in his CFTC COT Update, net short positioning has significantly picked up for the Japanese currency. Japan is set to report its next batch of spending and inflation readings in Friday’s Asian session and weak readings could push the BOJ to share more details on its easing adjustments in their November policy statement.
I haven’t set any actual orders yet since this pair could still toss and turn before the actual release, but I’m planning to go long on a break of the 128.00 mark or on a bounce off the 127.00 handle if the GDP beats expectations. I’ll have a tight stop just below the previous week low of 126.00 and I’ll aim for the next area of interest at 130.00.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.