Thread: Lets Talk GBP/JPY quotthe geppyquot

In the previous post I forgot to remark on something that shows up nicely before the trade signal on Aug 22....the 'trap pub'; this one follows six times of falling prices. I didn't take the 'break' of the pin of the very top because the RSI was not near the MA in the window. I've seen this scenario before and discovered that if I wait patiently to MA and the RSI to 'close the gap', I usually get a trade. The price ranged for 2 weeks before making an up movement as signalled for me. In fact, I might have taken this particular trade a day before utilizing the 4 hour chart (I will post more about this later), however the volatility of the pair makes me more careful in those situations.

The first thing you do to do if investing the GBP/JPY is to refer to it by its right name: The Dragon

Calling it The Dragon must tell you something: The journey can be thrilling but it's also dangerous.

If you except the fact that the two main drivers of currency price are interest rate differentials and equity driven carry trades (or that which professionals refer to as equity driven cross-border currency flows), then you need to get ready for a wild ride on Your Dragon moving forward.

Here is the very first thing to understand before approaching this beast:
the purchase price of GBP/JPY is equivalent to the price of GBP/USD multiplied by the price of USD/JPY or GBP/JPY = GBP/USD x USD/JPY. This works exactly the same for both E/J, A/J and N/J Too.

Let's review what occurred in the spring once the dollar weakened dramatically versus the large yielders (GBP, EUR, AUD and NZD) and diminished versus the Yen as GBP/JPY flew towards 251. During most of the time, the fed was percieved to be holding or maybe decreasing the overnight rate while the BoE, ECB, RBA and RBNZ were at rebuilding modes. Interest rate differentals were contrary to the dollar and the dollar weakened dramatically.

At precisely the exact same time, equity markets were performing very well and carry trades wound. When carry trades end (GBP/JPY enjoying), the dollar weakens versus the high yielders and gains vs the Yen. What this signifies is that in the spring, the two chief drivers of currency price, carry trade and interest rate differentials, worked SIMULTANEOUSLY to weaken the dollar versus the large yielders.

Let's look at today's situation. Many in the markets are worried the US might be moving into a recession. That means equities won't be favored and carry trades will loosen (GBP/JPY depreciating), causing the dollar to gain vs the high yielders and shed versus the Yen. But what can be happening is that because the fed seems to be lowering the overnight rate, the interest rate differentials are favoring the high yielders, meaning those forces will probably be pushing the dollar lower. The two chief drivers of currency price are currently working AGAINST each other. So far as G/U, E/U, A/U and N/U are worried, it's likely a tug or war will exist and that price will bounce back and forth. This has impliions for GBP/JPY because its price is a product of USD/JPY and GBP/USD.

Weekly chart:

As I had predicted that last week would be a bear week and it really turned out to be, now taking a look at the weekly fibonacci levels, GJ is looking to reevaluate the 50%, 61.8% and even touching 76.4 percent that's 212.45 area, the weekly chart is still bullish unless we get a weekly bar closing under the reduced TL, then things will probably change but in my prediction we'll touch the 76.4 percent in the coming weeks

http://img509.imageshack.us/img509/1134/gjmw1.gif


Daily chart:

As we've observed in the previous weeks, GJ retraced 50% of the move down and it's started to resume it's bearish trend today. The last day of the week, the candle closed well under the 38.2 percent fibonacci amount, the next level is the 23.6 percent that's also near the weekly 50%

http://img295.imageshack.us/img295/526/gjst9.gif


4H chart:

taking a look at the Green fibs, we finished 61.8% retracement and price has started to resume it's bearish trend. I also added the orange fibs, all these fibonacci are great levels to keep an eye, the beast will take a break at a few of those levels like it did in the 76.4 percent (orange)

http://img172.imageshack.us/img172/9167/gjwk0.gif


therefore, in simple phrases. . I visit 212 in the

I am definately bearish going into next week but I believe patience is needed for a great entry. Price action shows us an I4B week so we should remain ready for the move and after that 50 percent retracement nicely pointed out, the direction is down. Daily pub from Friday finished as a BEOB eventually breaking up the tripple low support in the 231.90 area. This alone is a really bearish sign. But we are at a brief term climbing 4h trend line and near the daily 365 ema so in these situations I love to wait for the bounce to perform out and we can see a retest of the busted support, turning into resistance, at the 231.00-231.70 area. A bearish reversal installation here on the hourly rate, rather a wonderful trap pub or a wonderful BEOB round the hourly 50 ema, would give us enough momentum to split the trendline, break the daily BEOB and perhaps force our way under 229. Good hunting!

In my last post I explained how my chart installation generated a 'buy' sign at the end of this Aug 22 Daily candle. But, 24 hours prior to this were favorable for this buy which makes it take a peek at the 4 hour chart. Slimming down to this timeframe showed conditions developing for a buy. 12 hours into Aug 22, the four hour chart showed a buy. I didn't take this ancient sign because of being very careful when trading this pair, but this egy works well on all other pairs too. If the 4 hour lines up with the Daily like this, the transaction will often be a rather great one.

I agree the general trend is down to GBP/JPY-but it's likely to be one straightened ride. I think that the post NFP price action is a pattern that will hold at weeks and the days moving forward.

There will be pressure on the dollar due to this interest rate differentials, yet the reverse cross border currency flows that will occur as auctions fall on the recession fears will work in opposition to that.

I don't honestly see how anyone can say that the trend is down on GBPJPY. Of course, fashion is relative to the timeframe that you are reviewing. If we are talking monthly and weekly we have a long way to go to be able to say, with assurance, that we are looking at a downtrend.

Originally Posted by ;

The two chief drivers of currency price are now working AGAINST each other. As far as G/U, E/U, A/U and N/U are concerned, it's very likely a tug or war will exist and then that price will dip back and forth. It has impliions that are significant since its price is a commodity of USD/JPY and GBP/USD.

That is currently my biggest problem. It used to work with USD when carries unwind, today I have climbing majors and some AND a dying USDJPY crosses going bye bye, too.

And I simply can't see a several thousand pip GJ death whilst cable soars to record highs, but items point to bullishness in GBPUSD and EURUSD. . .while important s/r and TLs are dying on the carry. I am hard pressed to combine these opposing views into one...

One of those two will have to turn around or get trapped so the other can move freely.

Originally Posted by ;

This is currently my main dilemma. When conveys unwind, it used to work with strong USD caused by flight to standard, now I have rising majors and some AND a dying USDJPY crosses going bye bye, also.

And I simply can not see a few thousand pip GJ death while cable soars to record highs, but things stage to bullishness in GBPUSD and EURUSD. . .while important s/r and TLs are dying on the carry. So I'm hard pressed to consolidate these opposing views into a single...

One of those two will probably have to turn around or have trapped so the other can move freely.

GJ will gradually follow. Dunno much about the fundies forcing the markets, but in my chart I've got an ascending triangle on GJ daily with 235.50 being the top. Additionally, it created a gruesome formation, which might lead us into new highs, or into a head-n-shoulders in 241-45. For now, I until 235.