Talking Points:
Major JPY crosses never broke out bearishly in Q1 2014
Ichimoku Momentum Only Showed A Correction
Signals For GBP/JPY Trend Continuation Abound
“Be patient and wait for the fat pitch.”
-James Montier
As fun as trends are to trade, they are rarer than many would like to admit. The number that often floats around with traders is that markets only trend about a 1/3 of the time. In other words, 2/3rds of the time, markets are in a correctionary pattern, an Elliott Wave term, or are ranging before their next breakout either higher or lower.
Today’s article is going to discuss how a multitude of JPY crosses like USDJPY, EURJPY, GBPJPY, and others are starting to show bullish signs again. Our preference for viewing an overall shift is Ichimoku which incorporates a trend filter, momentum, & a time component.
Major JPY Crosses Never Broke Out Bearishly
Many JPY crosses hit their 2014 highs on January 2nd, the first trading day of the year. This sounds like a bearish statement, however the downside lasted only a handful of weeks before the rebound began. What’s more, the JPY cross downside was limited as you can see that USDJPY only retraced ~50% from the October ’13 to January ’14 range.
Learn Forex: USDJPY & GBPJPY Weakness Was Limited in Q1 2014
Courtesy of Marketscope 2.0
Courtesy of Marketscope 2.0
Without Ichimoku, you can see that at the very least, USDJPY continues sideways or moves higher. The technical terms is that USDJPY either impulse higher or corrects sideways in a triangle formation which shows that the downside is limited. In other words, what won’t go down will often eventually go up.
Ichimoku Momentum Showed a Correction
Ichimoku allows you to grasp the entire market and its trending power in one glance. If you’d like a fuller view of the indicator, you can see the explanation here. However, with Ichimoku, when price is above the cloud and the lagging line or Chinkou Span is also above the cloud then you have both price and momentum in a trend.
Learn Forex: USDJPY is near a Bullish Breakout from Ichimoku’s Viewpoint
Courtesy of Marketscope 2.0
EURJPY & GBPJPY are also popular pairs to trade. Ichimoku has done a great job with GBPJPY to help you decipher a trend correction vs. a trend reversal. The ability to abstain from chasing a false breakout alone make Ichimoku a great tool to add to your trading. The benefit to using Ichimoku is to allow the trend filter to help you focus on price action patterns like the bullish pennant forming on GBPJPY.
Learn Forex: GBPJPY near Bullish Breakout Point at 173.56
Signals for GBP/JPY Trend Continuation Abound
The GBP has been one of the strongest currencies around the world although not as strong as the AUD. Of course, when a strong trend as present, many trades revolving around one very strong or one very weak currency be successful which is the reason behind trading the basket approach. The basket approach discussed in this article is the developing JPY weakness and specifically with the GBPJPY
Learn Forex: Levels Worthy of a GBPJPY Ichimoku Buy Signal
Courtesy of Marketscope 2.0
Entry to Buy: Price Holding > 170.5 (Base Line – Light Blue)
Protective stop: 170.35 (Below the Weekly Opening Range / Top of Cloud)
Limit: 174.42 (Conservative) / 176.89 (Extreme Trend) Based on Monthly Pivots
If this is your first reading of the Ichimoku report, here is a quick run-down on buy side rules:
-Full Candle Bodies above the Kumo Cloud
-The trigger line (black) is above the base line (light blue) or is crossing below
-Lagging line is above price action from 26 periods ago (Bright green line)
-Kumo ahead of price is bullish and rising (blue cloud = bullish Kumo)
Now that you’re familiar with a budding opportunity on GBPJPY with Ichimoku, feel free to try this information out on a FREE Forex Demo Account with access to multiple markets.
Happy Trading!
—Written by Tyler Yell, Trading Instructor
To contact Tyler, emailtyell@fxcm.com
Tyler is available on Twitter @ForexYell
To be added to Tyler’s e-mail distribution list, please click here.
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Ichimoku Shows GBPJPY Could Be Resuming the 2013 Trend
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