GBP/USD: Descending Triangle

A very clear descending triangle is set up on GBP/USD. A downside break here would constitute a reversal and add up to drop to 162.60ish in the vicinity of the ascending trendline underway from the March low on.

GBP/USD: Descending Triangle

Watching and waiting for materialization. The diamonds mentioned earlier are evolving into descending triangles themselves and in one case (AUD/JPY) a symmetrical triangle. This leads me to retain a bearish bias, considering a short on the typical JPY basket I trade (GBP/JPY, EUR/JPY, CAD/JPY, AUD/JPY, NZD/JPY) and GBP/USD.

Shorts for the Evening

Entering Short:

GBP/JPY @ 153.50

CAD/JPY @ 83.7

EUR/USD @ 1.4122

The gist of the technical justification for the short side on EUR/USD is in the post just previous.

G/J and C/J are exhibiting Descending Triangles at the top what I’m – currently – interpreting as a corrective throwback on a larger TF.  Looking at E/J, also….

More on why later.  Collapsing now.

Further Down the GBP/JPY, EUR/JPY, GBP/CHF Spiral

That’s an adaptation of a Nine Inch Nails remix album title. Random aside.

I reevaluated the ongoing viability of the downtrend in each of these pairs late last night after yesterday’s buy limits fired off to flatten my positions in them.

GBP/JPY and EUR/JPY were both relatively straightforward, each calling for continuation with a descending triangle ratcheting down to horizontal resistance at a significant fibonacci retracement level.

GBP/JPY retested 12/30’s sub-130 low this morning, but sprung against that level with little conviction. Looks like a throwback before another retest; perhaps a break is in the offing, but penetrating 15-year lows is no mean feat. The hammer followed by a doji on 1H is less-than-convincing for a reversal of trend.

GBP/JPY: 132.12 to 130.78: +134

EUR/JPY meanwhile has wound through a 1000+ pip drop since just before Christmas, once again picking away at 117.50. Recent lows sit several hundred pips off at 113.65 from 10/25-10/26. The six weeks following that leve that have elapsed (through 12/08 ) are littered with candles featuring long lower wicks bottoming out just above 116, suggesting a kind of capitulative give on the pair in October followed by solid basing until the upward correction began in force second-week of December. This morning there’s some bottoming out around 117.50, but a shooting star or maybe doji evening star looks to be setting upon the 1H. Ominous.

EUR/JPY - 119.03 to 117.89: +114

GBP/CHF played out similarly to the previous night’s trades; only this time I didn’t allow a wider-sweeping expectation to override clear analytical rationale: established downtrend, ranging period, consolidation during a mostly tepid Tokyo session followed by a breakout after Frankfurt’s open. I’m still holding 1/2 on GBP/CHF and with an evening doji star completing at 0600 ET on the 15M looking for further movement to ~1.6250; probably followed by a push back into the 1.50s

GBP/CHF: 1.6511 to 163.58: +153

0755 a.m.: covered the remainder on GBP/CHF at 1.6300.

GBP/JPY: Conflicted

Here’s a brief followup on yesterday’s abbreviated IKH post:

As discussed briefly yesterday, the cloud usually exercises a momentum-mitigating effect. This is because in IKH theory the area between SS-A and SS-B comprising the cloud represents price equilibrium, disorienting weak trending or capping counter-trending moves. When price lies above the cloud, this is a field of support; when below, a field of resistance.

Here, price did squeak out a counter-trending rally to 138.37 mid-day, but in keeping with the neutral-bearish bias gave back those gains through the NY close. Mid-day Tokyo retested 12/10’s high, but could not attain a close above 138. Now price has sold off again, retesting the week’s low at 135.90 where a morning star was put in on 12/09.

Chikou Span suggested resistance (printed on 12/03, not pictured) with a top around 138.40. Price current sits below price at the Chikou around 12/08’s high at 139.60.

Tinkan and Kijun still maintain their sideways march with no substantive divergence, suggesting neutral sentiment remains in play.

Here’s the GBP/JPY 1D chart referred to yesterday:

As you can see, price remains firmly in a mode of decline in IKH terms.

Looking elsewhere: is that a falling wedge, giving portent of a bullish reversal? There is horizontal support in the 135.50 area, but pattern clarity for a descending triangle is weak. There was previously support around 139 for a descending triangle with much better clarity, but price has wandered aimlessly just below that line.

Back on the 3H, the long lower shadows the pair continues to turn out suggest possible maintenance of a bottom on the retest here. Bolstering this idea is support the .618 retracement line (for 133.29 on 12/05 – 140.79 on 12/08) is offering at 136.10.

Price is moving out of the cloud below it, and while that is bearish, the kumo does pull back to ~138.84, where the .382 retracement for 133.29-140.79 sits 5 pips away.

Trades: yesterday’s long from 137.17 missed its target by a few pips, closed out manually last evening for a negligible gain. I may sit today out because of conflicting input – we’ll see.

GBP/JPY: Pennant Formation (ish)

Overnight the Guppy has been crawling along Senkou Span-A (this is from the Ichimoku Kinko Hyo study: the bottom of the cloud, in this case) and bottoming at .382 fib retracement of yesterday’s low/high @ 143.25, creating a descending triangle of sorts hoisted up several hundred pips from the reaction low set at ~139 yesterday.  

Last afternoon’s 1400-1500 candles  (1400 completing the morning star pattern) can be construed as a flagpole.  But, a descending triangle is not the construction featured in either flags (box channel range) or pennants (symmetrical triangle). 

Ignoring what may or may not be a pole, a new descending triangle has formed.  With the Cloud turning down to 141.40 on the 1H, I think that’s likely as an intraday projection.  Price is pushing the 143.25 threshold now, in fact  Still – and this is pretty atypical – I’m wary of a continuation/upside break, which targets ~146.80 and then ~148.90 afterward. 

Current positions: none.

Jobless Claims Tick Yet Higher

Jobless claims printed to the upside yet again, coming in with initial filers at 516k, the highest since 09/11. Continuing claims coincidentally moved up to the highest levels since 1983 (end-of-recession there). Noteworthy here is the 4-week moving average: the highest initial claim print since 1991 (amidst recession).

Any argument against domestic recession is defensible only on grounds of sheer pedantry (“where’s the second quarter of negative growth?!”, “The NBER hasn’t said anything to that effect”, etc.) at this point.

Normally this report has little impact because of the frequency with which it is issued and thus the swift obsolescence of the data. However, with the inclusion of downward revision and probing the deep fathoms of numbers typical of previous recessions, this week’s figures lend portent to nothing positive.

Sorry to be such a debbie-downer. Now, how about that horizontal support at 8200 on that descending triangle on the Dow? 8000, 7880, then back to the 2002 lows?

GBP/JPY: Further Downside Potential

The breakline for the descending triangle at 154.56 depicted earlier has broken; below that we return to 10/29’s low of 153.36 for intermediate support between here and 50% fibret support (139. on 10/24 to 165. on 10/30) at ~152.

Check out the symmetrical triangle (with some downside tilt, though not a descending triangle: a feature I find culminates in the intuitive conclusion of a downside breakout with fairly high probabilility):

 

I haven’t looked at domestic cash indices since early this morning, but I bet things are damn ugly.

edit: okay, I looked.  damn.  If I seem jubilant, it’s because I can make solid profits on a day when stocks are plummeting.  But then, I do remember losing on a day when stocks rallied.  Just that once.  Per week. 

Position covered here: GBP/JPY short @ 156.19.

The Weak v. the Weaker

I’m part of that  very small sub-set of occasional bloggers with 9 of every 10 posts dedicated to a triangle-rooted chart pattern on GBP/JPY.  ”Very small sub-set” as opposed to “sole individual in the universe” because there is one other guy that fits the same profile.  I’m sure of it.  So it goes, for now.

IKH – particularly the cloud/tenkan/kijun – offers a helpful visual representation of the consolidating range within the triangle itself.  The pair fell significantly (but not atypically these days) from mid-day yesterday, presumably in anticipation of the MPC induced cut this morning, with what comes off as a very muted initial reaction (outside the 0700 ET candle) to the additional 100 bps lopped off.  That’s a flashy display of monetary ordnance after all.

The overarching narrative in any market of truly global scale right now – Forex the example par excellence - is relative strength as I posted a few weeks ago; i.e., the weak v. the weaker.  Nowhere is that more apparent than in the resurgence of the greenback and the performance of the Yen.  With the CB’s gushing liquidity provisions finally realizing some benefit and a  correlative drop-off (though still significantly elevated) in LIBOR-OIS and TED spreads, we’ve seen some drift from the white-knuckled risk-averse approach that characterized much of September/October.  For a variety of reasons, however, I expect pessimism to prevail with further USD and JPY upside, barring significant intervention by the BoJ.  From whence follows my general ongoing bearishness on Yen crosses.

Yen Cross Breakdown Continues

Little reprieve for base currencies as the risk-averting yen rally proceeds.  The weak v. the weaker continues to prevail as the carry unspools.  I monitor USD/JPY, GBP/JPY, EUR/JPY, CHF/JPY, AUD/JPY and CAD/JPY, trading the first three primarily.  Each of these three has a pattern I am currently watching:

GBP/JPY has a descending triangle with horizontal support between 166-166.50.  Even though the decline on the Guppy has already been obscene, this pattern gives portent of a capacity for more:

EUR/JPY: Symmetrical Triangle

 

USD/JPY: Box channel/rectangle/horizontal range within a descending triangle

These triangles don’t have the most acute clarity with a few outliers increasing their randomness factor on closer TFs, but abide closely enough to take under consideration.  CAD/JPY, not mentioned above also exhibits a descending triangle worthy of notice. 

Fish Market Fridays

Well, GMT time, anyway. Just a note that I sold GBP/JPY again, but this time in SA2 (a derivative trade of the initial downside move caught in SA1 from 206.78 ) @203.22 Yesterday’s 20:00 ET candle began a short-term descending triangle from 204.76 to the fib retracement level at 202.54. Shopping for further downside below that fib level.

Currently at +42 with +10 locked for good measure. Below 202.54 I’m looking for further retracement to the 200.50-201 region.

Also, short EUR/CAD @ 166.68 (probably could’ve waited until London) in SA1, though my stop isn’t too far out @157.10. Looking for an (initial) downside extension to 155.23.

To figure out what I mean by “SA1″ and “SA2″, check the Brokerage Account Structure page in the sidebar.