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Orders Cancelled: 2011-10-13 02:02

GBP/JPY 1-hour chart

The markets reacted positively to developments regarding European bank recapitalization, as well as to news that Slovakian political parties were able to agree to a deal regarding EFSF changes. This sparked a wave of risk taking in the markets, allowing higher-yielding currencies to dominate the dollar and yen.

As a result, the pound trampled all over the yen, rising over 200 pips before topping out at the 122.00 MaPs. Unfortunately for me, I wasn’t able to hop on the Guppy train and I missed the whole move!

Looking back, one way I could have caught the move would have been to go long when a doji formed right above the weekly open at around 119.22. Though I do think that entering there wouldn’t have given me the ideal reward-to-risk ratio that I would have wanted. Besides, it’s not like I knew the pair was going to bust past the 120.00 MaPs so easily!

Hopefully, most of you had better luck than I did. If you caught the move, congratulations! Now how about buying your favorite one-eyed monster a drink at the nearest pub to help him drown his sorrows?

Trade Idea: 2011-10-12 02:40

GBP/JPY 1-hour chart

We saw a crazy risk rally in the past few days that led GBP/JPY to climb above the 119.00 major psychological handle. Now that price is above this former support and resistance level, I think there’s a good chance we’ll see it reprise its role as a support area. As you can see, crossing this major psychological handle has not been easy in the past. Why should it be any easier now? I say we’ll probably see another bounce before this bad boy breaks!

Furthermore, if you take a look at the 4-hour time frame, you’ll see that there’s a potential double bottom formation in the works. As you all know, this is widely considered a bullish pattern. Sounds like a good buy, right?

But this trade is not without its risks. Later today, we have some big U.K. reports coming out. Employment data will be available, and judging by the U.K.’s recent PMI numbers, there’s a chance that it may be disappointing. But to be honest, even if the employment reports do show weak numbers, I don’t think it’ll have a lasting effect on the pound. Risk appetite has been relatively healthy lately, and I think that should help prevent it from falling any further.

Besides, if the pound managed to rise above 119.00 in spite of the fact that the BOE expanded its asset purchase facility, it should at least be able to hold its ground with weak employment data, right?

In any case, here’s how I set up my trade:

Buy GBP/JPY at 119.00, stop loss at 118.40, profit target at 120.00.

I’m only risking 0.50% on this trade since it involves a bit of event risk.

What do you guys think? Anyone willing to join me?

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.