Is This The Bottom?

Last week, I was on the air live with Dale Pinkert, host of FXStreet’s Live Analysis Room. My episode is down below. It’s always fun talking GBP with Dale because he always has insights to share with me as I do with him. His experience in futures on top of the forex always leads to a good conversation. The interview never feels like an interview. Just good trading talk between friends.

The interview took place the day before the September non-farm payrolls dropped. You’ll hear us talk equities quite a bit. With the weakness in the $SPX, I explain why the $GBPJPY was actually looking to fall further to 174.86 and possibly even as low as 167.99. But the weakness in the NFP report may change everything. Apparently, Yellen and the $FED did know something we all didn’t know. The recent global malaise in China, Syria and Brazil are, in fact, starting to show ripple effects in the U.S. economy. And if this economic weakness becomes a trend, interest rate hikes out of the Federal Reserve are off the table. Probably completely. Definitely for 2015. The lack of wage growth and the less-than-expected jobs growth has finally convinced markets that the $FED is not moving on interest rates. In fact, whispers of QE4 are back. Expect that drum to beat louder if the U.S. economy starts to show more weakness in the months ahead.

Looking at the $GBPJPY as our equities proxy, the Friday close above the 181.00 support level is a bullish signal in light of the strong close in the S&P 500. Watch here:

Is Risk Aversion Here To Stay?

The Japanese yen has found new strength on the back of risk aversion flows. It is one of the biggest beneficiaries as a safe haven currency. With the Swiss National Bank intervening to prevent safe haven flows from strengthening the Swiss franc and the U.S. dollar dealing with new interest rate expectations, the JPY has received a bulk of the risk aversion flows in the market. Evidence of this is the huge gap down the $GBPJPY experienced when the new trading week opened compared to the $GBPUSD or GBP/CHF. As the Greek debt crisis now deals with this new normal — a rejected austerity plan and debt repayment package — the $GBPJPY may continue to move lower.

GBPJPY WEEKLY CHART

The $GBPJPY made a new low at 189.59 [on Monday], establishing a level of support for the week. A move below the gap low targets the 38.2% Fibonacci level at 187.84. The major support and psychological level at 1.9000 is the level to watch for direction in the new trading week. The prior bullish wave already found resistance just ahead of the 1.9000 level at 189.68. Last week’s bounce higher after the gap down still has yet to fill the gap even as the bounce higher this week has already filled the gap. A continued inability of the $GBPJPY to fill its own, very large gap is a bearish signal. Coupled with the building bearish divergence between price and momentum at the recent 195.86 new highs, the $GBPJPY is poised to move into a deeper correction of the entire rally off the 175.00 major support level.

Momentum on the daily chart waned very sharply at the highs last week. This sharp decline in buying momentum resulted in multiple false breaks of the 195.50 resistance level. Though the gap lower is due to fundamental reasons, its occurrence lines up with the technical developments over the last several trading sessions. Already lower than the previous low on the RSI, this new selling momentum has broken below the 50.0 level into bearish territory. The gap lower this week has broken below the major 190.00 support level. However, that price move lower was immediately met with bids that rallied price right back above the 190.00 level to a high of 191.64. These highs are finding resistance ahead of last week’s lows. If the $GBPJPY is unable to move higher, it is likely that price will fall back towards the 190.00 support level.


This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

CHART OF THE WEEK: FAILURE MEANS SOMETHING

Each week, I highlight a chart out of the Quid Report.

The $GBPJPY failed above the 195.50 resistance level all week. Now that $GBPJPY has moved lower off these highs this week, is it now ready to break higher?


GBPJPY 4 HOUR CHART


This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

CHART OF THE WEEK: YEN SURGE

Each week, I highlight a chart out of the Quid Report.

The Bank of Japan (BoJ) fueled yen weakness despite keeping monetary policy as is to maintain its massive quantitative easing (QE) program. While the BoJ does not see a need to further expand QE, they do confess that they will not meet their inflation target in 3 years. This admission gave sterling traders the green light to send the $GBPJPY back to the February highs at 184.00. This chart shows an early entry into this rally on dips back below 181.00, well ahead of when the BoJ policy statement was released.


GBPJPY 4 HOUR CHART


This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. AVAILABLE NOW.

My Appearance on FXStreet’s Live Analysis #FXRoom

It was FOMC DAY in the #FXRoom yesterday. A big day for a big interview and Dale Pinkert (@forexstophunter) at FXStreet didn’t disappoint. We talked about the how the $FED may effect markets just a few hours later. I run through some chart art on the $GBPUSD, $EURGBP, $GBPJPY, $GBPAUD, and $GBPNZD. This is my 1st interview since launching Quid Report. So I basically talk through this week’s issue giving traders a sneak peek into my new project. Enjoy the video!

The Yen’s End Game is Nigh

The $GBPJPY broke its range and moved lower last weak. Yen strength has been relentless. With the very odd effect of QE actually having a beneficial effect, JPY has been pushing higher across the board.

After the breakout of the range to the upside fizzled, it appears that the $GBPJPY would like break lower still. This break of the range to the downside appears much more sustainable now. It is supported by momentum with the RSI still so squarely in the sell side below the 50 level. A break of 175.00 will have to be confirmed by a hold of 175.00 on the eventual bounce off new lows. A hold of 175.00 allows swing buyers to step in on an epic rally back above 181.00.

GBPJPY WEEKLY CHART

The weekly chart confirms the importance of 175.00. The 168.00 level holds a lot of weight to the downside. The 180.00-181.00 resistance zone is critical to the upside. The support level at 175.00 has finally been broken. We have our lower low due to failed highs after the previous attempt at 175.00. Bids were lined up at 175.00 as this bounce has become a reversal. To be sure, late bulls who were more tentative to step in front of the relentless JPY strength, will come in on dips.


This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. AVAILABLE NOW.

QUID REPORT – NOW AVAILABLE

QUID REPORT

Election jitters played out in trading last week as the GBP weakened across the board. Economists and financial media took to extreme headlines about sterling volatility spiking due to the uncertainty surrounding this particular general election cycle. The GBP did slide but election jitters did not take the GBP under siege. Rather, the Bank of England (BoE) hold on monetary policy last week gave the GBP a bit of reprieve from the election selling. Without a statement from the BoE after its policy announcement, the market is left to trade on its own expectations for a series of interest rate increases out of Great Britain to begin in early 2016. However, in the past few weeks, BoE members have taken to jawboning to temper those hawkish expectations.

In addition to hawkish expectations and election jitters, trading this month is already fraught with seasonality themes….

Read the full report: Quid Report, Volume 7 (subscribers only).

CHART OF THE WEEK: YEN STRENGTH

Each week, I’ll highlight a chart out of the Quid Report.

This week it is the $GBPJPY daily chart. We had been anticipating a break of the range into support level since the beginning of the week. The $GBPJPY finally did break lower and now the big 175.00 support level looms ahead.


GBPJPY DAILY CHART


This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the top of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. AVAILABLE NOW.

My Appearance on FXStreet’s Live Analysis Room

I was thrilled to be back in the #FXRoom with Dale Pinkert yesterday. He brought me in to talk all things GBP covering $GBPUSD, $GBPJPY, $GBPAUD, $GBPCAD. But he also gave me some nuggets of wisdom on the EUR via the $EURUSD giving some confirmation on the $EURGBP. The show unexpectedly became a golden example of how traders come together with different perspectives and expertises to edify one another.

I also give a sneak peek to a new service I am launching very soon. Watch out for it!

Yen Positioning for the New Year

After finding support at 181.41, the 38.2% Fibonacci retracement level, the $GBPJPY was able to stage a rally back to the 187.50 highs. However, the rally petered out before it could make a high higher than the previous 189.69 high. This leaves the bias to the downside for price action coming into this trading week. As such, price has moved lower to close last week at 184.63.

GBPJPY daily chart Jan 4 2015

With the RSI already printing a new low on Friday’s price action, price has bias to move lower still. Given that the 38.2% Fibonacci support resulted in a failed new high, I expect that the $GBPJPY make a move into the 50% and 61.8% Fibonacci levels.

However, the 181.00 support level is very formidable. If we look at the bigger timeframes, we can see that 181.00 has maintained support for price even with several false breakdowns when price trades at these current levels. Now that price has moved lower this week, 181.00 is the level to watch.