British Pound May Have Bottomed vs. Japanese Yen
- British Pound confirms bottoming clues with trend line break
- Final profit booked on short position triggered above 135.00
- Re-entry may yet make sense on lingering fundamental trends
The British Pound began hinting at a brewing recovery against the Japanese Yen last week, posting a bullish Piercing Line candlestick pattern coupled with positive RSI divergence following a test of trend line support set early July. Confirmation now seems to have materialized after prices broke downward-sloping resistance established from September’s swing top.
I entered short GBP/JPY at 135.56, initially targeting 133.42. The trade hit the initial profit target on September 16 and profit was booked on half of the position, with the stop-loss adjusted to breakeven. I will now exit the position, locking in profit on remaining exposure and moving to the sidelines.
The trade validated its initial fundamental reasoning rooted in expectation of disappointment in the BOJ’s updated monetary policy regime and found an additional accelerant in worries about the UK government’s apparent willingness to risk “hard” Brexit, foregoing access to the EU single market. Both narratives may yet reassert themselves and deliver another selling opportunity and I will continue to monitor price action for an actionable re-entry opportunity.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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