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Monday, January 7, 2013


Bullish triangle  (11th of February 2013)

You can clearly see that gbp/jpy formed a bullish triangle on hourly chart and nicely broke it today. I haven’t traded the pair for a while because it was heavily oversold, but this could have been a good opportunity. I was in other securities when it broke out upwards. Reversal patterns is the thing that you have to look for when you want to jump back into the main trend and find a correct entry point for doing that. Reversal patterns is the thing that you have to look for when you want to jump back into the main trend and find a correct entry point for doing that. A break of 146.65 point would have been a good entry point (5th point in the triangle). As the pair near resistance you should have exited by now. Of course, you might expect new highs. In that case keep it, but tighten your stops. The trend remains bullish. 

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Pound is still in uptrend  (7th of February 2013)

It was interesting to watch price action in pound pairs today. For no clear reason most of pound pairs jumped up way before BOE rate decision was announced. Is the downtrend in pound over? Maybe, maybe not. It has not started in gbp/jpy yet though. I do not like trading BOE rate decision as I know that we always have ECB coming after them and also having a press conference. I see the latter much more important as the former and you can see it for yourself from today’s price action. Action started after Draghi press conference. Remember the fact. Buying pound on dips against Yen is still the choice for those who love the pair. 

The only pound pair to buy (5th of February 2013)

gbp/jpy is the only pound pair where you can buy pound, because the only weaker currency than pound Yen is. However, if you look at price moves in the pair it is not such a weak move after all. It is better than most other Yen pairs, except eur/jpy. So, if you are a great pound bull concentrate on the pair waiting for dips to buy as Yen downtrend is nowhere to end yet. We need fundamentals to change. In this case, bank of Japan has to fail to act on what they have promised: a lot of easing. This isn’t happening at the moment. So, Yen is a sell and pound is a buy on dips.

Still above breakout level (4th of February)

gbp/jpy broke resistance of 144.75 on the last day of January and has been staying above the level ever since. Do not be surprised if the pair goes back beyond the level. Much depends on what Bank of England rate decision is. Nobody expects a lot of changes, but as expectations of analysts often go wrong we should not rule the chance that BOE will do something to build in trust in British pound. If it does not pound can still go up against Yen, but it will probably not be the best pair to play against Japanese Yen. It (pound) will fall against other currencies too. 

Cable got hit (2nd of February 2013)

Pound hit on the last day of the month and yesterday. It is obvious that market is running on expectation regarding Non Farm payrolls. However, if the number comes out disappointing all of the gains of the cable can be erased within one hour. It is very risky to hold large positions at the time of the release. I would prefer waiting till a few minutes before the release and then placing stop buy and sell orders above and below 4 hour charts. And these would be very small. I am also looking at gold. That could be an even better trade then currency pairs. Follow the market whichever direction it takes. 

Resistance is broken (31st of January 2013)

gbp/jpy surpassed my expectations today by breaking 144.75 resistance. Well, I guess my expectations were not in line with the markets. I hoped the pair to stay in a tight range till Non farm payrolls, but traders are trading worse than expected numbers before the release. Nothing will probably change till next week interest rate decision from Great Britain and Europe. If the stance of those remains the same the trend of gbp/jpy and its’ ‘sister’ eur/jpy will probably continue to be upwards. 

FED rate decision (30th of January 2013)

Yen was pressured by most currencies today. No wonder why. We have FED interest rate decision coming at 19:15 GMT. This could increase volatility in gbp/jpy tremendously. The pair managed to rise to 144.40 resistance today and bounced off the level. It is very important level as it was hit for the third time in two weeks. In previous two times the price of gbp/jpy collapsed after hitting the mark. Today’s event will determine whether the resistance will be taken out or we will see 142.00-141.80 and possibly 141.10 support levels. I will be monitoring price action during the news is released with some orders to buy and sell breakouts of 4 hour candles. 

Consolidation (28th of January 2013)

British pound retraced around 200 pips against Japanese Yen in two days after having made a huge rally on the 24-25th of January. Bearish comments from the future governor of the Bank of England cause the pound to slip across the board. Support is now at 142.50-30, resistance starts at 143.20-50. Despite weak position of the pound in general, its trend towards yen is upwards and one should look for opportunities to buy near support. 

Flag in the pair (25th of January 2013)

I told you about a bullish flag that gbp/jpy was in. Well, today it was broken. As you may know a breakout of a pattern usually occurs when the fifth point of the pattern is made. 143.10 was the last fifth point. The pair briefly retraced after it has reached the point. It would have been a good point for a stop loss and a buy stop order for a breakout would have to be a few pips above 143.10 level. The resistance is at 144.75. I think it will be reached today. Nice ride! When you are on such a trade you should move your stops placing them below 1 or 4 hour charts with an exact take profit point. Do not forget to take off your profits before weekend. Who knows what might happen! 

Big rally (24th of January 2013)

The pair managed to overcome its’ resistance of 140.80 today and rallied more than 100 pips. It was a nice move, but gbp/jpy reached its’ resistance of 142.00. Another level stands at 143.00. We have to watch what happens around these levels. We might be in bearish head and shoulders pattern formation and that could take the pound to much lower levels. If price goes to 141.00 level I will wait for a reversal pattern to start buying during European or American sessions. Not earlier! I am not selling the pair yet.

Head and shoulders? (24th of January 2013)

Ok, so 118.30 level resistance was taken out and Yen dropped more than one hundred points after this breakout. Now, 120.00 area is very important as the pair has a potential to form a bearish head and shoulders pattern and reverse downwards for months to come. I would take profits at the level and watch what happens there. New highs as always are possible. However, opening new positions the market after it has rallied more than 100 pips is not a very smart idea. Be patient and learn how to day trade the smart way. Do not be greedy. 

New lows and rejection of them (22nd of January 2013)

gbp/jpy failed to show such bullish action as eur/jpy did today, but a bounce of 139.80 level was pretty strong. Looking at hourly and daily chart we can see a few scenarios developing. One is that there could be one more bullish flag developing in gbp/jpy pair. In that case, the lower part of the flag 139.80 serves as support and 143.00 acts as resistance before it is broken upwards. The second scenario is that the bullish move is over and we are going to see a collapse in the pair. Pound is hitting support again and again, which means lower prices are more than possible. Possibility of head and shoulders pattern is also there. If the second scenario comes true we may  see gbp/jpy going to 135.00 area very fast. 

Visiting support (21st of January 2013)

Pound bumped into some serious support area. I do expect it to bottom on hourly chart. Wait for consolidation at the levels for a day or two. The way upwards is blocked by 200 simple moving average on 1 hour chart. BOE minutes should give stimulus for the pair on Wendensday. If no serious fundamental changes come gbp/jpy will continue going up. Stay away from trading when prices are moving sideways. Breakout trades could be good here when consolidation is over of prices jump upwards. 

No new highs (18th of January 2013)

Contrary to eur/jpy, gbp/jpy pair failed to make new highs yesterday. It means that if you want to short Japanese Yen it is better to do by buying Euros and selling Yens. Pound will probably visit its’ most recent support at 142.50-141.65. This is the area where further drop should be stopped and opportunity to enter new longs in Pound. I expect some bullish signs at this level. It most probably be some bullish candles or 123 pattern. I am not buying if those above mentioned support levels are not reached. 

Two pairs correlate (17th of January 2013)

Whatever happens to eur/jpy also happens to gbp/jpy. Pound has gone up around 260 pips today and this might not be the end of the move. Pound created bullish reversal pattern (123) near the bottom and then rallied strongly. It has broken resistance area of 142.45-95 and now seems to be reversing somewhat. It most probably is some profit taking. Support is now at 142.20, resistance at 143.50 and 144.75 (very important). Buying on dips is my strategy for the pair. 

Bulls getting stronger (16th of January 2013)

I am not as bullish about gbp/jpy as I am about eur/jpy, but today’s price action in Pound Yen pair shows that Pound bulls are getting stronger. The pair is now facing resistance of 200 sma on 1 hour chart at 141.95 level. However, 2 bullish candles on 4 hour chart give hope that the resistance will be taken out and the pair will try to go to its’ most recent top of 145.00. If price breaks current resistance of 200 simple moving average next resistance area is pretty strong and comes at 142.50-143.00 level. Buying on dips is a possibility.

Hourly formation fulfilled (15th of January 2013)

gbp/jpy has followed its ‘aspirator’ eur/jpy today. The pair formed head and shoulders pattern on hourly chart and collapsed through first support level and hit the second one. Previous support is resistance now and support is at 141.50-60 level. 200sma on 1 hour chart should act as support at least for some time. However, you should not be surprised to see more resistance from Yen bulls at these overbought levels. I am not in a hurry to buy Pounds till I see some bullish signs of bullish candles or reversal patterns. I am standing aside now. 

Reversal (11th of January 2013)

After a very strong move yesterday gbp/jpy is reversing today. It is quite natural as most traders are taking their profits. This downward move is more influenced by closing profitable positions rather than reversing their positions and going short. Although the uptrend might be over it is not logical to reverse your position as long as there are signs of a reversal. I have marked two support levels for the pair in the chart below. More corrections are possible now as gbp/jpy has rallied a lot since the middle of November – 1800 pips. 

123 pattern (10th of January 2013)

gbp/jpy had a false breakout downwards on the 8th of January. The pair however reversed sharply after forming 123 reversal pattern and has been going up for a few days now. The ascent accelerated today led by rally in Euro. So, British pound follows Euro in this rally and Euro appears to be a leader in this move against Japanese Yen. Pound has not recorded new highs as Euro did and we should be watching 142.75 level very carefully as it is resistance now (most recent top). Support is at 1.4150 now. 

Triangle in short term charts (8th of January 2013)

The technical picture of gbp/jpy is pretty much similar to that of eur/jpy. We do have a triangle on 1 and 4 hour charts. 50 sma on 4 hour chart is below the price. It adds to the bullishness of British pound. The pair has formed a similar pattern just before New Year, which was broken upwards on the 31st of December. The pattern was smaller, but the move was pretty impressive.  I expect the same for the pair. However, you should not forget that the move can be downwards too, not only upwards. 

BOE rate decision will probably push the pair out of its’ current cage. Let us be patient till tomorrow and see how market reacts to Bank of England monetary policy update. 

gbp/jpy outlook (7th of January 2013)

gbp/jpy moves in tandem with eur/jpy pair. So, analysis of these two pairs will often be quite similar. Pound moved out of its’ summer ranges a little later than eur/jpy and in this Yen sell off it follows Euro as it remains one of the strongest pairs against Japanese Yen. November the 14th was the day when real advance started. In terms of pips, Pound gained a little more than eur/jpy. I like the gbp/jpy pair, because it is very volatile and forms very strong moves. 

The sentiment for the pair remains bullish as long as reversal signals appear. The pair is in a small range of 140.16-142.06. Lower high may form and if that happens a break of that lower high could be a trigger to enter longs. A break of the above mentioned support (140.16) can be a trigger to go short. gbp/jpy is above 200sma on both 1 and 4 hour charts. 

The pair will probably continue trading in the range till Thursday when BOE interest rate decision is announced. That will certainly push the pair to new levels (higher or lower). Day traders could take reversal trades at opposite sides of the range. Swing and trend traders should wait for new tendency to develop.