GBPJPY analysis and intermarket relationships:
If you have been following us on Linkedin, then you would know that many months back, we had shared an analysis on GBPJPY and how the price is near an important liquidity zone and how the price if rejected would present a great hedging opportunity. We have now rejected the liquidity zone and price has now broken market structure on a weekly basis. This is important. It is very likely that the market is likely to head lower. But that does not mean that we can go ahead a short the pair. After big down moves like this, the market makers often move the market slowly and steadily to hurt the shorts who were in already and making them close out the shorts. So we can potentially have big retracements within the big move down.
So although price can potentially continue lower without much of a retracement, we as retail traders can pick where we play. We think that the best shorts are in the shaded area. You adjust the shorts based on your portfolio value. GBPJPY is also a big carry trade currency pair and it is closely correlated with risk and when the market is falling, gbpjpy often falls with it. Also GBPJPY can potentially warn of impending market crashes which is why it is interesting for us. This significant move down suggests that we have to be cautious of big moves down in the stock market.
But this price action aligns well with our current outlook of a rally heading into the midterm election followed by a sell off. So we are expecting price to drift up slowly along with a bullish move in the stock market. These are only our expectations. We need to closely follow the price to see if our premise is right. If the premise is proven wrong we move onto the next one.
This is the 4 hour chart. The price is in consolidation. the swing point is at 108.93 If we have a bullish engulfing candle which breaks the swing point, then it is confirmation that the price is heading to the balanced price range ( shaded area on the weekly chart). So we are waiting for confirmation but we have taken longs on GBPJPY in our multistrategy portfolio with a tight stoploss. Until this analysis is invalidated by price going below 207 we will entertain only longs setup ideas.
This is for educational purposes only and done in good faith. This is not investment advice
May peace be upon you all.
