Safe To Sell The Yen Yet?

Last night saw both USDJPY and GBPJPY charts close with bullish reversal candles. I’m looking at the risks of going long Sterling/ Yen here.

GBPJPY
Here’s a trade to test the metalic structure of your testicles; yesterday’s daily chart closed with a classic hammer candle. This is a strong reversal signal which, combined with an RSI of 19, makes a long bet 800 pips lower than a week ago pretty tempting. So tempting in fact that I went long overnight, buying at Y142.10. However, this trade was so volatile that I allowed myself to be stopped out this morning for +60 pips.

The trouble is, this is a high risk/high reward trade; a bit higher up the adrenaline scale than EURGBP. Until it has reversed the trend is still definitely down; check out the Parabolic SAR, the 21-day moving average, the DMI. A continuation of the downward move sees the price 300 pips lower to test yesterday’s low point; a rise is probably capped at Y146 by the 200-day moving average.

I’m not keen on trading against the trend, but reckon there’s a long trade there for the brave. I’m looking to go long again in small size, but would like to see a pullback from the current Y143, as I’d place my stop just under the day’s low of Y142.

On the other hand, I can’t see the big accounts joining in yet as it’s still against the trend, so there’s no harm in watching today’s action and waiting for a close higher than last night’s to add credibility to the reversal pattern.

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