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Can Downward GBPJPY Momentum Continue?

Can Downward GBPJPY Momentum Continue?

2013-04-03 19:00:00
Walker England, Forex Trading Instructor
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Article Summary: The GBPJPY has declined 451 pips over the last two trading weeks. As scalpers look to take new positions, traders question if momentum can continue.

The British Pound (GBP) continues to be on the Forex chopping block as one of the markets weakest currencies. To maximize in its decline, scalpers will want to identify a strong directional currency pair that is currently maintaining momentum in the direction of the trend. Today the GBPJPY will be in focus as we look to identify future scalping opportunities.

To maximize the decline of the Great British Pound (GBP), today we will be pairing it with the Japanese Yen (JPY). The pair has been in a steady decline for the previous two weeks and has dropped as much as 451 pips. Traders can use this bias to identify new selling opportunities as the pair continues to move towards lower lows.

Learn Forex – GBPJPY 4HR Trend

Can_Downward_GBPJPY_Momentum_Continue_body_Picture_2.png, Can Downward GBPJPY Momentum Continue?

(Created using FXCM’s Marketscope 2.0 charts)

GBPJPY Building Blocks

Once a trend has been found, traders can prepare to block off their charts to ensure momentum is heading in the direction of the trend. This step is taken to avoid potential reversals and identify key technical levels for trading. As seen in the graph below, we will be reviewing a 30 minute chart that segments our trading week between Wednesdays and Sundays. Let’s review exactly where momentum is heading for the pair.

To start our blocking analysis, Block 1 begins on Wednesday the 27th and runs through Sunday the 31st. Block 1 displays the GBPJPY moving off its highs at 143.80 to form a new low at 14202. Block 2 also shows the GBPJPY moving toward lower lows. As depicted that low resides at 141.96 and denoted support until this morning’s breakout. Knowing that short term momentum is continuing across both trading blocks, in the direction of the primary trend, short term traders will continue to look for new opportunities to sell into further weakness of the GBPJPY.

Learn Forex – GBPJPY Building Blocks

Can_Downward_GBPJPY_Momentum_Continue_body_Picture_1.png, Can Downward GBPJPY Momentum Continue?

(Created using FXCM’s Marketscope 2.0 charts)

The key to momentum analysis is to ensure that lower lows are continuing to be made in a downtrend. Traders using this style of analysis will look for the continued breakouts and scalping opportunities under the Block 2. It should be noted that while the GBPJPY currentbreakly continuing its downtrend, it is always possible for prices to revert towards higher highs. If this does occur, traders will then look to identify better opportunities with a stronger trending pair.

---Written by Walker England, Trading Instructor

To contact Walker, emailinstructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.

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