It looks like the trend lower in GBP/JPY has shifted this week, breaking above a strong resistance area to eventually reach my stop level and close me out. Here’s a quick review.
Short-term Resistance on GBP/JPY?
After taking a nibbler short position on GBP/JPY last week to play a Fibonacci setup on a descending market, my other short order was triggered just a few days later. Through this time and up until today, it’s likely Sterling bulls were slowly taking back control after a net positive run in U.K. economic updates (UK inflation unexpectedly overshoots BoE target, UK jobs market shines, and positive growth in July retail sales) and active efforts by U.K. Parliament to block a no-deal Brexit outcome.
Fortunately for me, 129.50 proved to be a tough resistance area to crack, at least until today when Sterling popped higher on a misinterpretation of comments from German Chancellor Angela Merkel that Britain had 30 days to find a solution to the Irish backstop. She later explained that wasn’t the case, but unfortunately for my trade, GBP/JPY broke the strong resistance around 129.50 to triggered my stop at 130.25 and close out my short position for a small loss:
Total: -101 pips avg. / -0.50% loss on 0.50% original risk
Looking back, while the pair did break above the Fibs and held, my fundamental bias to be short Sterling remained strong as the rhetoric from the EU and the UK on the Brexit deal was bad enough to hold onto the notion that a no-deal Brexit is still the likely outcome and that the British pound will continue to weaken–and despite today’s events (which didn’t really change anything), I still firmly believe that.
So, while this trade didn’t work out, on the bright side I can say that there’s wasn’t anything wrong with the trade and I made a good call keeping the position small. Now, I may be able to hop back into this trend lower at a better price and with a bigger position if the situation calls for it, which would likely result in covering that small loss pretty easily.
Well, that’s it for now. What do you think of how this idea on GBP/JPY played out? Would love to hear your thoughts so please don’t hesitate to share in the comments section below!
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