GBP/JPY, EUR/JPY: Turning Bullish?

The Guppy has been staging something of a rally on the back of a bit o’ risk appetite seeping back in and ahead of the all-but-certain BoE/MPC rate cut (consensus is held at 50bp from 1.0% to 0.5%), vaulting out of a symmetrical triangle yesterday (about which I almost posted, but life somehow got in the way) from the low 138’s around 24 hours ago to the present level, where the pair is yet again approaching a retest of 141.65.

This session brings with it a retest and tentative breakout from an ascending triangle above 140.75. With room above of 100 pips, the pair should tag the 141.35-141.65 region with little difficulty, but with a rate cut in the offing in several hours a break above this level (in place since early January) is anything but assured.

After 0700 ET I’ll be monitoring for a break above, but wonder if a rate cut will hamper the lift necessary to get over the hump. If that break occurred, the next area of interest lies at 143 and then ~144.50.

EUR/JPY and GBP/JPY have show a tight correlation, with similar consolidative constructions occurring in tandem on both pairs. Not coincidentally, the ECB also has a rate decision today, with a 50bp cut widely expected. The levels on EUR/JPY to break above are at 125.50, followed by 126 and then 128.20, the latter of which would bring the pair back to resistance set in early January, correlating to the 141.75 level on the Guppy. Past 128.20, the field is wide open to ~131, as denoted by the 261.8% fib projection line (purple)/horizontal resistance line (white) in the upper-right corner of the following chart:

Both pairs look poised to continue their corrective action to 141.75 and 128.20, which represents 100% retracement of the January highs to the lows set out in February. A break above there (of which I’ll have no certainty until it sets up on a TF that’s tradeable for me) throws the medium term bearish scenario on each pair into serious question.

The Triangle Trade

EUR/JPY continues to wind through a symmetrical triangle that may ultimately spell a further slide for the Euro when the breakout finally comes. Right now price lingers at the upper descending trendline, mulling over whether to advance above or fall back from the 61.8% fibonacci retracement level @ ~117.85 (for 121.50-112 back on 01/18-01/20). That said, there’s an alternate upper descending trendline (this is starting to sound a bit too Elliott Wave) made of touches at 121.50 on 01/18 and then ~120 on 02/08-02/09. That lies at 119, where the 76.4% retracement for the above interval lies.

EUR/JPY: 3H

There is an ascending triangle abutting against this level, however, with the horizontal trendline with a few pips of 118. A break here would also move the pair above the 194 EMA on the 3H which (on my chart, at any rate) has hemmed in the pair on the upside intraday.

EUR/JPY: 15M

GBP/JPY is also moving through an almost-culminated ascending triangle within a larger symmetrical triangle that is apparent on the 1D (not shown) with a descending upper trendline currently at 136. This overlaps exactly with the 76.4% fibonacci retracement level for 140-122 (closing values for Jan 6, Jan 25).

GBP/JPY: 15M

I’ll trade either way as it comes (e.g., EUR/JPY’s trendline tag compounded with the 61.8% retracement level offers a bearish scenario, potentially), but I think upside breakouts are probable overnight on both pairs: a break held above 118 on EUR/JPY; likewise for the 133.75 level on GBP/JPY, targeting ~119 and ~136, respectively.

0020 ET 02/19: Against expectations, the lower ascending trendlines have broken, so I’ve deployed some shorts (also on AUD/JPY) using the close below those lines on the 15M as the trigger line. Some hammers are forming on the current candle, however, corresponding with support at the 144 EMA on EUR/JPY and the 61.8% retracement level on GBP/JPY. Probably giving the shorts room to run for the time being….

0615 ET 02/19: Well, it seems my initial conviction was correct and by actively monitoring the aimless warbling around midnight talked myself out of some legitimate calls. And to think, I even noted the hammers forming…. Stopped out at BE on GBP/JPY, EUR/JPY, -48 on AUD/JPY, -57 on GBP/USD. Thus the vicissitudes of requiring at least some sleep before getting up for work in the morning.

0340 ET 02/20: A little late for any new reflections but I’ll state it anyway: “Damn.” Across thousands of trades those listed here are of minimal consequence, but reverting from assurance on a sound technical basis to tentativeness is not a choice that just sloughs off as trivial. Was the rationale that got me into the trade invalidated, or is it that I set up a longish daytrade/potential swing trade and then almost whimsically decided to reverse it on comparatively scant evidence?

The second scenario. I daytrade well when I do it, but that is not my usual or favored m.o.. Taking a trade in one mode and then revising it in another while retain initial expectations is simply foolish; and I’d like to think I’ve come far enough to know when I’m doing this as I’m doing it. The “analytical fog” that accompanies disorderly revisions is easily identifiable, but oddly impairing of judgement. But then, calling up disciplined rationality to burn that feeling off rather than leaving it to cower beneath the mist in a corner is one of my own most difficult struggles as a trader.

Anyway, as my best childhood friend used to remind me after one of those devastating high school break-ups: “Andrew, hay mas peses in el mar”. One time he even wrote it in Japanese Hiragana on my fogged-up windshield (he could also do an almost endless succession of front hand-springs in a row…which is somehow related…); but that time it was to remind himself. I never washed the interior car windows back then, so it really became a humidity-activated sticky note that appeared occasionally for a couple of years. Apparently it worked. Ingenious, really.

Triangle Break – Guppy Long

 Awhile back I picked up the use of 144 and 169 EMAs from the Vegas 1H Tunnel method and have kept them around for reference with the other relics in my tool chest because of how price reacts to them. To them I added an additional interval 25 periods away to create a three EMA series with a 194 EMA (also a highly useful value, as it turns out, even if it doesn’t have any real mathematical significance other being the “smallest Markov number that is neither a Fibonacci or Pell number” – whatever that might mean).

Those are the yellow lines reflected on the following chart:

Triangle Break - Tunnel Break to follow?

This “tunnel” often acts as a field through which price behavior experience some volatility, often spinning off as a reversal, correction or breakout. If GBP/JPY does traverse all three EMAs (194 sits at 126.31), resistance follows at ~127, 127.55, 128, and ~128.70.

01/27 0500 ET: Closed GBP/JPY at 126.65 for +205, EUR/JPY at +120. My thoughts are that the movement toward at least 128.70 (more significant resistance ~130) will resume once this pullback to at least the 194 EMA at 126.31 or somewhere within the congestion zone around 125.45-126 – or things could move back down to 124.67, which remains pivotal short-term.

GBP/JPY Battles the Pink Robots And Wins

Right around 124.67 (the previously, previously discussed 261.8% fibonacci extension line) there’s an ascending triangle winding out that looks to break up or down (but usually up) sometime in early Tokyo. You’ll find the same construction across the board on JPY crosses.

Da' Guppy: Ascending Triangle Breakout?

Listen to the Flaming Lips’ account of the epic altercation here:

Okay, so that isn’t really GBP/JPY they are talking about. But you guessed that already. Right?

That track necessitates inclusion of my favorite song off of that disc, one of my favorite albums (of the last 10 years, at any rate):

Not a bad video, either.

IKH: GBP/JPY – 12/16/2008

I’ve already forsook the modest goal I set of two or three IKH analyses a week.  Doesn’t seem outrageously ambitious; but these past few weeks once the house begins to settle after 9 p.m. I’ve got very little left over.  In fact, I began one of these last night, but was cajoled into watching the 1970’s-era Wuthering Heights (a novel which I’ll secretly admit to liking) and nodded off almost immediately (really must quit making a habit of that).   But, before I start bemoaning my sorry lot in earnest:

GBP/JPY - Ascending Triangle?

The IKH picture here is somewhat changed from a week ago. 

• The cloud-flip (Senkou Span-A and Senkou Span-B reverse position) on 12/14-12/15 mentioned on 12/10 as a neutralizing component on an otherwise bearish chart brought an upside breakout with the cloud’s lack of density.
• The series of candles following the overnight bottom on 12/12 lifted the (blue) Tenkan above the slower-moving (red) Kijun as 12/14 turned over into 12/15, giving portent to significant rally through 12/15.  
• Tenkan emergence above the cloud following a cross beneath it upgrades a weak bullish signal into a moderate signal, but movement of Kijun above the cloud.  By early morning ET on 12/17, the final two red candles of 12/11’s decline will fall off (recall Kijun’s original setting is 26 periods), which ought to significantly raise the line, perhaps out of the cloud altogether.
• As we noted, last week’s cloud was very thick; by way of comparison, now notice the change in density and series of flips for this week.  This denotes neutrality again, and suggests ~137 is a near-term fulcrum point but is neither firm resistance or support.  Price last week and this has borne that out.   
• The Chikou Span hovers around the 78.6% retracement from 140.79-132.61, pointing out the latest failed salvos against the ~139 resistance zone.   Notice the clarity with which the Chikou conveys price action around fibonacci levels.

Then there are the white lines drawn in. There is an ascending triangle, but lower marks for uniformity give legitimate misgivings about the upward breakout capability of the pattern. Be that as it may, ~139 has continued to serve as a pivotal area, which the horizontal white line indicates:

Fundamentally, I feel like arguing against an upside breakout because I just can’t shake the overshadowing pessimism merited by all of this month’s data, not least of which the FOMC announcement earlier today. Apparently, the equity markets disagree (“It’s finally priced in”, blah blah etc.), but does GBP/JPY?

With the pair coiling tighter, I tend toward a further retracement to 100% again (140.79), where the next true resistance level arises. Medium-term sentiment remains bearish-neutral until something arises technically to prompt otherwise.

0700 12/17/08: There was a breakout, to the downside, with a decline of roughly 250 pips overnight. Looks like the upside-averse intuition about fundamental weakness slackening risk appetite was a sound one.

Now price has returned to and is testing Senkou Span-A at the bottom of the kumo. If a break occurs there, a push down to 134-134.25 would follow; maybe back to a retest of the recent lows.  There is a confluence of support between the 23.6% retracement (for 140.79-132.61) and SS-A in the 135.50-135.75 region.  A close held below the cloud would lock a further move to 134, perhaps back to the 132s.

Within Cloud, testing Senkou Span-A

Pair Notes for Evening Trading

A few notes from among what I’m watching this evening:

EUR/AUD: Well, the breakout I was looking for didn’t materialize above 1.6481, which for a 3rd time in 4 days proved a firm point of resistance on the pair. So, we’re stuck in yet another sideways patch. The framework here is a fib retracement of the extension from 1.5912 to 1.7412 Currently, we’re lulling between the 61.8% (@ 1.6481) and 78.6% (@162.70) retracement levels of that upward move. Because of it’s coincidence with .786, which functions as a typical reversal level, 1.6270 is a pivotal level, as we’ve just seen. So, We’ve seen a bounce off of 162.70, and now 3 separate attempts to breach 164.81 with higher lows along the way. The ascending trendline is sitting at 1.6395, 15 pips from here. No guarantees, but I do see an ascending triangle here that is about break tension with upside potential. I’m buying in SA2 @ 1.6420. Unless something averse occurs, I should be carrying this trade into tomorrow.

AUD/USD: I see the same chart pattern on AUD/USD. Extension from .8505 to .9505, price retraced 50% to .9009 (January 14/15 resistance) during March 20-24, and has been on extension back to resistance since. I’m looking for a break of .9425 to test the .95 level again. That said, I am concerned about the moderately inverse correlation coefficient between EUR/AUD and AUD/USD: just about. -.5 (think of this as “the pairs do opposite of one another 3 out of 4 times”) on the hourly, and about -.73 (“pairs do opposite almost 7 out of 8 times”) on the daily. As a result, I’m sticking with the EUR/AUD trade. If downside potential on AUD/USD presents itself, I may take a trade off of it in SA1 to complement the EUR/AUD.

GBP/JPY: The Guppy is backed up against 204.20 with nowhere to go. In the scope of the full decline of 212.86 to 192.01 (basically 2100 pips) we just saw a revisit of extension from 208 (23.6%) to 200 (61.8%) and now a retracement since Sunday back to the current level shy of 204.00, with 204.81 (38.2%) acting as our next retracement barrier; but again, 204.20 is presenting some interference to that advance. I’m long @ 203.64 in SA1 expecting movement north.

There’s more on other pairs, but enough for now.