Really good moves in GBP/JPY in this morning's webinar. The pair had been selling off strongly in the run up to the London open, but stalled at the low of the session at 126.88 as London traders came on board.
And the decision, as always, is whether after such a strong move, the pair would continue lower, or provide the opportunity for a counter trend move. And in considering a counter trend trade what risk factors we would need to be aware of before undertaking such a trade. From a technical perspective it was the extent to which JPY buying was likely to continue, and from a fundamental point of view we also had Labour market data for the UK due at 9.30 BST.
A further point to consider in any potential counter trend trade is the range of the pair in question. In GBP/JPY we have a pair that can move substantially, but this comes at the price of heightened volatility.
Nevertheless, GBP/JPY was text book with the stall at 126.88 providing the requisite platform of support for the pair to pause and consolidate, And once the CSI began to signal a sell off in the JPY, we did indeed have an opportunity to enter to the long side. This was highlighted on the renko in the 127 region with the pair moving higher to 127.33 - the high just before the news release.
As David & I mentioned in the webinar, when in a trade before a major item of news the decision is always whether to close out or not. But with the cost of trading now highly competitive, closing out ahead of any news release, and taking any profit is acceptable, before deciding whether to re-enter.
This morning's UK data did result in a minor correction of the bullish move, with a pause at the 127.25 support, before we saw a resumption of the move higher. However, it was a volatile move higher before the pair posted a strong two bar reversal on the 5 min chart at 127.53, and the renko topping out at 127.46, and despite a minor attempt to rally back, GBP/JPY also provided a strong trade to the downside taking the pair all the way down back to the low of the session.
A real rollercoaster, but creating great trading opportunities. ... See MoreSee Less
The other half of the Brexit equation is, of course, the euro which last week sold off quite strongly against the USD and the CAD, with the latter posting five straight down days. So no surprise to see a bit of a respite this morning, and move higher for the single currency.
Against the GBP euro continued higher where it topped out at 0.9140 on Tuesday and together with Wednesday's candle produced a two bar reversal. However, the move lower hasn't really put much of a dent in the monthly eur/gbp candle which continues to be bullish.
This week it's the ECB's turn with the usual interest rate decision and press conference on Thursday, but which is preceded by Mario Draghi's 'welcoming remarks at the European Culture Days of the ECB' in Frankfurt. Absolutely no idea what this is about, but you can bet your bottom euro he will take the opportunity to mention 'Brexit'!
For eur/usd1.0963 has provided support for the current move higher, but the pair facing resistance at the key 1.10 price point. No huge option expiries today for eurodollar, but shorts added to their positions last Friday, by almost 10k contracts, thereby taking the total net short number to 93,472. ... See MoreSee Less
The final day of the summer marked the start of yet another season of futile policymaking by two of the world’s major central banks – the US Federal Reserve and the Bank of Japan. The Fed did nothing, which is precisely the problem, while the alchemists at the BOJ unveiled yet another feeble unconve...