Week 4 Oct 2015 GBPJPY Long Setup #2

FX:GBPJPY   British Pound / Japanese Yen
73 1
This setup from previous chart analysis is not over yet, but there is a new entry level as explained below. Read it for more rationale behind this setup.

Hacking the Fundamentals

While the FOMC was hawkish on their statement and the possibility of a rate hike on December increases, the fundamentals behind UK and the Pound continues to be the best among the West. So nothing has changed, the GBP remains strong, and the recent decline is more indicative of the USD's strength than GBP's weakness.

Next to release a statement is the Bank of Japan where it is expected that they'll be neutral. Neutrality could mean a prolonged stability of USDJPY between 120.000 and 121.500. Though, there is also a slight probability that BOJ will expand the QQE. Regardless of their decision, JPY is a weak currency. So we're still looking to trade the divergence of GBP's strength and JPY's weakness.

There is no scheduled data releases coming from UK today that could weaken GBP and break the support at 183.90. While JPY will stay in consolidation as it waits for BOJ's decision on Friday.

Trading GBPJPY

Sparks of GBP's strength is evident as GBPJPY reached for 185.00 before retracing down. This retracement down to 70.5% is a good opportunity to enter long.

I have placed a buy order at 184.20.
First TP at 185.20 (+75pips) for a 1:2 RR.
Second TP is at 186.00 (+180pips).
Stop is at 183.85 (-35 pips).
Oct 29
Trade active: The first target has been hit for a good +78 pips and 1:2 RR.
Oct 30
Trade closed: target reached: Our 2nd target was hit at 186.00. That's +180 pips.

Summary: The BOJ didn't change their policy. There is no further easing as they might be counting on the Fed to do the strengthening of the Dollar, and therefore the weakening of the Yen. Though there was a brief moment right after the announcement where the Yen got stronger, it went back to weakness as the market realized that nothing has changed.

All in all, this trade went well as the market reacted to how I expected it to react given the fundamental climate. As expected, it's the GBPJPY who made the bigger moves as opposed to just trading USDJPY.

Again nothing has changed, so I'm still looking to buy this pair on pullbacks.


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