QuantumLogicTrading
Short

SELL GBPJPY: RISK-OFF SHIFT COMING? LOWER BOE MONPOL EQUILIBRIUM

FX:GBPJPY   British Pound/Japanese Yen
GBPJPY:

1. Given Fed Yellen's "hawkish" market response and GBPUSD             , GBPNZD             and GBPAUD             shorts TPd on the rally lower today cleared (FX risk book clear too), im looking to add some safe haven assets to my portfolio.

2. Looking at GBPJPY             and GBP structures on the whole, there has been alot of sterling longs in the past 2wks accumulating in spot as economic confidence falsely increases ( imo             , given intelligent money understands near-term UK risks are to the upside).

- GJ rising some 7 of the last 9 days, and now 400pips above the aug 16th lows of 129 at 133.3 I think there is at least that 400pips in downside available from here as the new equilibrium for several reasons:

1) Fed Yellen being hawkish looks like it may be the catalyst for the september US Equity sell-off, in which case, highly negatively correlated assets (e.g. safe havens yen, gold             UST             ) are likely to pick the bids up, thus driving GBPJPY             lower i.e. A tightening of financial conditions in the US will put pressure on US equities and also US election risk will transfer into Yen demand - also Brexit/ A50 risk is a medium term yen topside catalyst which makes sense owning through GBPJPY             downside.
2) GBP shorts at these levels, given the monpol introduced by BOE, look like the smart move as the market is significantly higher than the monpol lows (which should be the new equilibrium).
3) Further BOJ action             is made more unlikely by a hawkish Fed - hawkish fed looks to have provided $yen some topside support in the immediate term if nothing else, this eases pressure on the BOJ to ease - though a counter to this is the recent BOJ Inflation CPI             traded some 30bps lower at 0.5% - the biggest drop since its inception (and the lowest level ever) this could be a push to more easing. However, the July Meeting misfire when expectations were perhaps at their highest and the current JGB drying liquidity situation somewhat capping the extent of further easing, I cant see the BOJ doing anything more than jawboning, as they have consistently continued to do (and about the only thing they have). Also for extra confidence, even if the BOJ was to ease - look at the past 2 times (Jan April             ), both policy measures provided 0 equilibrium relief to yen downside and infact fueled some 500pip+ topside to yen, so yen bulls imo             can feel conforted that further easing is likely to have little impact, even more so as their ability to do more is ever reduced.
4) Technically, as mentioned weve been on a 2wk bull run so i feel GBP topside is due a rebalancing lower, and also the downside targets are not uncharted territory having traded at the 129 level on 2 previous occasions so the profit target isnt unreasonable.
5) I hear RM long-term short positioning, is picking up at these levels where sterling looks arguably overbrought.

Trading Strategy - SHORT GBPJPY             @133.3, add at 134 135 and 136 - TP 130.5 and 129

1. Short GBPJPY             - Small at market price 133, and add ever 100pips higher if bulls continue up to 136 - the macro resistance levels on the daily are the 134 and 136 level.

- Short small here at 133.3 and ADD as we move higher as short sterling given brexit/ monpol future and long yen given the risk-on bull run which is bound to run out given hiking and election risk intensifying imo             is an all but guaranteed trade.[

2. I also remain short gbpusd             into rallies at 1.32./i]

Any questions on the trading strategy PLEASE ask!!
im also hold long..according to monthly gj try to perform hammer or doji...
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snapshot


I will not advice selling GJ at current weekly Price Action.
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Good analysis and makes sense when you are explaining. Thank you. Short for me
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My Pleasure! Follow for updates, sterling/ gbp is going to be a continuous trade for the rest of the year now.
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