GBP/JPY: Breakout Imminent?

There’s a state of ambivalence regarding GBP/JPY among the aggregate body of active currency traders that has no parallel. One end of the spectrum is occupied by mentally over-leveraged, hyper-aggressive speculators who trade the Guppy almost exclusively because of it’s propensity for long, satisfying trends initiated or punctuated by sharp breaks that yield hundreds of pips in a matter of hours. The other end is populated by the more conservative denizens of the market, for whom the pair is abhorrent because of the exact reasons their risk-taking antitheses love it.

That’s something of a facile generalization of the sentiment regarding the pair; the point, really, is that the pair is arguably the most dynamic and fascinating Cross Rate pair in the marketplace. I happen to think so, anyway: the trading opportunities, the volatility, the impact of the Yen carry make it very interesting to follow whether trading it or not. That said, I do usually trade it a number of times a month, often swing trading in and out of larger trends.

Now for some technical notes on the flippant little fishie:

Ascending trendline begun 03/17 intersected with resistance @ 200.79. Trendline (and short-term range from 199.41 to 200.79) break yesterday after German IFO print, bounce off the fib extension from 213.46 to 203.43 @ 199.25. Rally from double bottom against ascending line to 201.70, rejected to below 200.79 to keep descending trendline begun 02/24 from 213.46 intact. RSI from 197.42 on 3/26 0600 EDT 1H Candle making higher lows at 03/26 0800, 2100, and 03/27 1400 (bounce off 50 here), consistent with up-leg in triangle. RSI dip to 47 at present, quoting 199.60. (A chart would certainly be useful right about now – but I’m too lazy to switch back to Windows to grab it from MT).

The overall trend here (cf. descending channel begun late Sept./early Oct. ’07) remains down (only a sustained break above 206.50 would challenge that). So, price is building an upward leg off the bottom of the descending channel in a short-term symmetrical triangle that is finished converging. A 5 pt. trend uptick on ADX and a definitive move away from 50 on the 1D RSI would more-or-less clinch the breakout. One of the sites I sometimes compare notes with shares a similar mixed sentiment with favor toward further JPY upside.

At any rate, I don’t care either way: when it goes, there is one thing needful, and that is to go along with it. To quote Bill Williams from Trading Chaos: “I propose that our quest can be summed up in five words: want what the market wants“. I resolve to have no expectations; only to be where I ought to be and flexible enough to align with the market when it moves.

Behold, a school of Guppy Traders. See how some of these smart smelt specimens are swimming with the trend…err, current, and others are going against it? There’s a net, a tin can, and some mayonnaise and celery chunks waiting for those imprudent whelps. I hate to eat other traders, but this is, as they say, a “zero-sum game”, and if someone’s gonna end up advertised in a grocery store circular as a cheap, Spam-equivalent tuna substitute at 50 cents off, it might as well be the other guy.