GBPJPY Continues Short Term Momentum

Article Summary: Yen pairs are favored by scalpers for their trends. Today we will review the GBPJPY and its 500 + pip trend with its potential for future short term positioning.

Japanese Yen pairs tend to be extremely popular with Forex scalpers. This is for good reason as Yen pairs tend to form exceptionally strong trends. However before considering any new positions, scalpers should investigate if short term momentum is moving in tandem with a primary trend. Through this analysis scalpers will develop a trading bias, as well as identify the strongest currency pairs for trading.

Today we will focus on the GBPJPY. As it continues its current 527 pip trend, we will look to identify short term momentum to validate any new scalping opportunities.

Learn Forex –GBPJPY 4Hour Trend

(Created using FXCM’s Marketscope 2.0 charts)

As trends develop, it is inevitable that there will be pullbacks against the markets primary direction. This can be a hindrance to scalpers that want to trade the market when momentum is optimal for new positions. One way to avoid counter trend scenarios is to better pinpoint the direction of short term market momentum. In an uptrend like the GBPJPY, scalpers can use a blocking technique to divide their charts into segments or pricing blocks. If price is in an uptrend price should be making higher highs and higher lows for each segment of the graph. Let’s take a close look at the GBPJPY.

Below we can see the current GBPJPY on a 30min chart divided into two pricing blocks. Block One is formed from Wednesday the 17th through Sunday the 21st. During this period we can see the GBPJPY create a series of higher highs, while advancing as much as 373 pips. Next we will look at Block 2 which again moved to new highs. In a strong uptrend, both blocks should be creating higher highs in the direction of the primary trend. Our analysis confirms that is exactly the case with the GBPJPY. Now knowing that current momentum is headed in the direction of the trend, Forex scalpers may continue looking for new opportunities to BUY the pair.

Learn Forex –USDCHF Trading Blocks

(Created using FXCM’s Marketscope 2.0 charts)

It should be noted that the GBPJPY is currently trading over the Block 2 high at 153.80. At the present this should be taken as a bullish signal and a continuation of our analysis. However in the event that price direction changes and the GBPJPY moves to new lows, this would signal potentialat least a temporary momentum shift for the pair. In the event of price breaking below the Block 2 low at 152.32, short term traders should consider exiting or suspending any existing long trades while seeking a better opportunity.

---Written by Walker England, Trading Instructor

To contact Walker, email instructor@dailyfx.com. Follow me on Twitter @WEnglandFX.

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