GBPUSD and GBPJPY

If there has been a currency that comes close to being as reviled as the USD this is it, although it managed to pull ahead of the dollar for much of this month. Now it looks as though it might be faltering. I’ve been long and short this month in GBPUSD. Currently I’m short, holding two positions from 1.6555 and one from 1.6530. One is slightly in profit; one is slightly under water. The pair is in an overall downtrend since July on the daily chart. RSI is confirming this downtrend. In the light of so much divergence on the charts lately this is nice to see. It managed to climb above a downward sloping channel but this is something the cable has been known to do. It may return to and find support at the top of that channel. Or it may fall back into it. A short at these levels wasn’t particularly risky because I could set a tight stop.
What’s interesting to me about this chart is that RSI never dropped below 30 into the oversold level. Yesterday’s candle is bullish. Here’s the daily chart:

I’ve also been in and out of GBPJPY several times this month. This pair can be like Mr. Toad’s Wild Ride which means potentially big profits but also potentially big losses if you don’t choose your entry points carefully and trade with a tight stop.

On the daily it’s in a large range of 139.70 to 163.09. It may be forming a smaller range within this one with a top of 147.48 to 153.25. I bought at 148.99. Yesterday it was up as high as 151.75 so I took some profits and left a smaller part of the trade on. The profit stop is at 100 pips so I can’t lose now regardless of what happens.

On the three hour chart you see that I bought as it left the bottom of the interim channel. I was a bit late on that buy which meant my stop had to be below the bottom of the channel (151 pips). That’s too wide for many people but I had signals from shorter time frames that hinted at a rally. In addition, the potential was great with a top at 153.25. Finally, with the wider stop I cut my position size to a third of what it normally is. Needless to say, I watched it carefully after the buy to see if I needed to pull the plug.
That could be a flag on the chart. If so, potential profits are the length of the flagpole or near 155. Well that would be nice. Not likely, but nice.

Here’s the 3-hour chart:


Before I leave this pair, look at the RSI on the daily chart. As the pair dropped it bounced off the .382 fib retracement indicating a shallow retracement in momentum. Nice confirmation of a good buy. Remember, though, that I didn’t have that signal when I bought. Here’s the daily:

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.