The GBP/JPY pair is looking interesting at the moment because after consolidating around the 150.00 area for several weeks, it fell sharply to 140.00 but has now recovered most of these losses. Indeed the pound has strengthened against the yen quite considerably because it is now trading at 147.26 at the time of writing, and was above 149.00 on Friday afternoon.
So where does it go from here?
Well if we start by looking at the daily chart, the Supertrend indicator is still red, which obviously means that the price is still technically trending downwards. There's not a great deal in it because it only needs the price to close above 149.38 for this indicator to turn bullish, but for now I personally will be looking to go short.
With the price trading nearly 800 pips above it's most recent low, I think there is still plenty of downside potential, and we are certainly due a retracement of some description. Therefore I am currently watching the EMAs on the 4 hour chart because as soon as the EMA(5) crosses below the EMA(20) I shall be ready and waiting to open a new short position.
I've got a terrible feeling it's going to happen overnight when I'm tucked up in bed, but hopefully it will hold off until tomorrow morning at the earliest, so I can trade this particular set-up. As long as the price doesn't close above 149.38 (which would indicate a new upward trend), I'm confident about trading any downward EMA crossovers that may occur in the near future.
(Just a reminder that this does not in any way constitute financial advice. It's just my own personal opinion).
UPDATE: The GBP/JPY pair, or at least the EMAs for this pair, did cross downwards overnight, but thankfully I managed to go short at 146.00 after a nice retracement this morning. I've already closed half the position for 70 points and dropped my stop loss to break-even, so it's now a free trade. My next target price is around 144.20 because this is the next key fibonacci level.
UPDATE 2: Second half of the position closed out at 144.20.
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