During previous couple of months, I had several trades in the GBP-JPY, all of them on the short side. Since then, all of the yen pairs rebounded substantially, although still staying within longer-term consolidation visible on daily charts. It remains unclear whether the earlier weakness was a start of the main-trend reversal but this coming week could help us determine that. Two key events will are likely to influence market’s reaction: the BoJ policy meeting and the GDP data. Analysts are expecting to see economic growth for Q4 at 3.1% annualized an increase from the previous reading of 1.1%. Obviously, whatever the Bank of Japan decides to do will depend on the GDP numbers. No matter what happens, the Yen should create decent trading opportunities. After all, the volatility has been good for some time and is likely to remain lively, fueled by these important fundamental events.
Most of the Japanese Yen pairs have settled into a consolidation of late. With direction of the next move uncertain, I am going to try a little bit on both sides of the market. My buy order in the CAD-JPY using 4H chart still stands, but I also see a possibility to go short. On the hourly chart, the NZD-JPY is showing a new support at 84.63, so a move below it would indicate a buildup in bearish pressure. That is why I have a sell order at 85.58, seeking about 70 pips. If this happens, I will take a look at the intermediate-term chart and decide about additional short trades.
In manner similar to last week, I will again look for a short-term reversal trade in early hours. This time, the GBP-USD is the instrument of interest, which closed near the daily high on Friday. Preferably, I want to see a new high for this move after the open, followed by a bearish reversal candlestick pattern on the 1H chart. It is impossible to say which one that might be, but my interest is in the main, most common patterns, such as the engulfing line, the doji, the shooting star or the dark cloud cover. Most likely, the objective for this trade will be in a range of 40-50 pips, although details will have to be worked out later. Have a great trading week!
Mike K.