GBPJPY—made it

I haven’t written about this pair since Feb. 1 when I was long from 130.65. I wrote then that the pair had to close above 134.23 for the breakout above the long-term downtrend line to mean anything. Yesterday afternoon, it touched 134.26. I shorted there because I expected it would be good resistance and there was negative divergence. This morning I closed one of the positions; I moved the stop on the other to breakeven. I’m at a conference today so don’t have time to do a lot of analysis but the pair’s behavior is interesting in light of some risk aversion.

Note that it still hasn’t closed above 134.23. I’d expect one of two things in the near-term in order to remain bullish on the pair: it will either quickly retest 134.26 and close above it for the week (very bullish) or it will retrace to .382 or .50 of the recent move up, staying above 132.00 and then retest. This would probably happen next week. Of course, it could always sink like a stone but not until it gets below 130.00 would I be too concerned. It has not been below 130.00 this month although it touched 130.01 on January 31.

A successful close over 134.26 would put the pair on track to resistance at 135.22, 136.24, and 137.79. After that there is very little in the way of resistance until 141.19 (confluence) and then price resistance at 145.98, last April's high.

© Dianne Fecteau, 2011. 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.