Hello traders
Separate from the weekly newsletter, we are going to run an additional article with just one high probability trade for the week.
The challenge this will present is using high time frames without any lower time frame confirmation or adaptability for how the market develops.
It will primarily be based on a macro and sentiment bias, couple with daily time frame TPO’s and charting.
This week’s Trade of the week we will take a look at GBPJPY.
Currently the market is trading back at the physiological level of 200, and so far today it appears to be failing to break once again.
JPY has weakened significantly in recent years due to the BOJ holding onto near zero interest rates whilst other economies experienced harsh rates rises in a fight against post pandemic inflation.
So why GBPJPY:
The BOE has already cut rates to 4% and is expected to continue easing slowly.
This means the GBPJPY rate differential is shrinking, which applies pressure as market begins to price this in.
Bias: GBP/JPY vulnerable to downside if BoE cuts faster than expected.
As long as the market maintains below this 200 key level, preference is for a sell off from this level as JPY regains ground as traders bet on the yield differential shrinking.
GBPJPY 15min chart
Technical Outlook
Capped at 200, GBPJPY is entering into a range, with a sharp sell off imminent. The question is whether the market will try a final push up and through 200 trapping buyers first.
It appears it is only a matter of time before we are trading back below 198 and 196 in extension, however timing the market is always key.
I will be happy to take shorts at the current market price 199.6, with SL above 200.30 in the first instance, as the risk:reward still makes sense.
Failing this, I will look for the market to break back below 200 and sustain before eyeing up further shorts.
Disclaimer: Trade of the week is not financial advice. Please trade with caution and always follow your own research.
I will be sharing my thoughts are the market develops via twitter once again. https://x.com/AaronSwney
Look out for unscheduled updates during the week.
All the best.