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I’m giving my Guppy short idea another chance now that the pair broke below a long-term support zone. Think I can catch more pips this time?

Short GBP/JPY Idea

A few weeks back, I shorted this pair after the daily ascending triangle resistance held as a ceiling and price broke below the neckline of a small double top pattern. However, I chickened out and closed early when price seemed to struggle to make new lows.

Little did I know that risk aversion would prop the lower-yielding yen up while a less hawkish BOE statement would simultaneously drag sterling down. I guess you can say I’m still feeling a bit bummed out about my decision to exit since the pair eventually hit my target and is now breaking below the triangle support.

GBP/JPY Daily Forex Chart
GBP/JPY Daily Forex Chart

Because of that, I’m looking for another shot to sell this pair, ideally on a pullback to the broken triangle support around the 142.00 handle. Stochastic is already indicating oversold conditions on the daily time frame anyway, so there may be some profit-taking activity soon.

Data from the U.K. economy has been mixed this week as hiring and retail sales turned out strong but the more important CPI report was downbeat. This could convince the BOE to sit on its hands for much longer instead of coming close to another interest rate hike.

Meanwhile, the yen is drawing support from the political ruckus in the U.S. since this is dulling the dollar’s safe-haven shine. Japan is set to print its own CPI readings at the end of this week, though, so I’m inclined to wait and see how these numbers turn out before hopping in.

Keep in mind that the BOJ has been slowly reducing its JGB purchases, but that the impact on the yen has been limited so far because traders are putting more attention on global bond yields. If the central bank keeps this tapering act up, the yen can eventually catch up to the gains.

I haven’t set any short orders just yet since the pair is already moving past its bottom WATR for the week. Besides, GBP/JPY could be in for some weekend gaps since most market moves have been driven by headlines these days. I’ll keep y’all posted!

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