Shorting GBP/JPY

neal s.

I was thinking of shorting the pair this week, it has been in a weekly channel since last Oct.(6 significant touches) and looks to be breaking back down the channel. Every large move in this channel has retraced to at least 61.8 and we are only at 23.6 based on the up move started in early March. It also looks to be breaking the 4 hour channel started since April 5th. Also a double top( or very close to it) has formed on the day charts. I made 157 pips trading a 10k lot from 142.95 to 141.37, but it seems to be headed back to 136.00. My strategy is to short it tonite after I see what happened over the weekend and to see if it moves back up for a time. I'm new to forex(about 2 months) but have been profitable thus far(financial goal of $350.00 per week to start). It is not my day job!!!! I have a disciplined system of trading only 1-2 trades per day with 10k-30k lots depending on risk. Never have over 3% risked on any trade. I want to try a longer trade with this pair shorting a 10k lot around 141.00 with a goal of 137.5 possibly by the end of week if the pair behaves according to the channel. I will place a trailing stop to follow it down. All the indicators seem in place, but obviously that can change. I was hoping to get some input from more experienced traders on my thoughts for this trade. Fundamentally with the goldman sachs news it seems to help the pair also. Thanks in advance for any advice!!!


On anywhere from a 1 hr to a daily chart, you're looking for a breakout trade.
Even though the UK economy is no daisy, the writing is on the wall for Japan too. They may have an advantage with the CNY appreciation, but basically I'd like to emphasize that in this kind of position it's extremely difficult to decide on a reasonable stoploss value.
I say that because stoploss values should be set at prices where it's clear that the trend isn't going to match with your guess.

If you pair the fundamentals and my take on the current price, you should either avoid trading that pair, or go long instead of short on the pair with a stoploss for more lots than your original position so that if you do have a break out (and you have time to watch and set a new stop loss) you can do well.

At the end of the day, I don't expect the JPY to show any more strength in the near future against the GBP than it has in the last year or so.