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Latest Confirmations (part 2 of 2)

Sun, Oct 7 2007, 09:47 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

I began the first of my two letters to clients emailed on Monday, October 1st, as follows:

<All I can say now at the debut of the European transacting time is that my previous market opinions remain in place.

Once again, beware of the GBP/JPY.>

My opportunistic interest in the Japanese Yen crosses is hardly any new story. As described in my FXstreet.com notes dated August 26th, on Monday August 20th - immediately after the Federal Reserve's decision to cut the discount interest rate - I privately emailed the following notes:

<I believe sellers have just lost the initiative in the global stock markets, the USD/JPY and the Yen crosses, as well as in the European currencies versus the US Dollar. If some congestion time develops from here, the Federal Reserve have just bought us time to decide what next.

I see the GBP/USD having room nowadays to advance to 2.01 - 2.03.>

My bullish view of the Yen crosses took a break in mid September, when as mentioned here on FXstreet.com I thought that 'a perfect storm may be approaching, primarily in the global stock markets - some of the major European and US stock indices currently topping my list of regular observance - as well as in the Japanese Yen's currency markets'. At that point, the main Yen crosses had already recovered for hundreds of pips since their bottoming out on August 17th.

But I never truly wanted to utilize what is known as a limit order in order to sell short any global stock market or Japanese Yen cross pair. I only wanted to do it at market, at the price right there in front of me, and with enough courage to overleverage. Such kind of courage never came, though.

And then, all of a sudden, something got me interested in the GBP/JPY back again in the late US afternoon time of Thursday, September 27th, and made me consider as follows:

<In the longer run I remain generally pessimistic about the British Pound, - however, if I were a momentum trader, I would keep an eye on the multi-day price congestion that's still ongoing in the GBP/JPY.>

Only hours later, on Friday September 28th, I updated my observations and felt necessary to add:

<And, even though it dipped under 233 in the Asian time yesterday, the GBP/JPY eventually closed the week just nearby the 235 level.
Although setups like that multi-day (even multi-week) price congestion still ongoing in the GBP/JPY are not as easy play as one may generally expect (or a standard manual of technical analysis would have one to think) - I now can only reinforce my recent opinion, that a momentum trader should take notice of the significant bullish pressure which apparently is accumulating in this Yen cross pair and which may lead to a breakout higher.>

And then, in the second of my two letters to clients emailed on Monday, October 1st, it seemed like relatively safe to announce:

<I think it is reasonable to say now my few-old day bullish view of the GBP/JPY is materializing.>

I chose to only reinforce my expectations further on the following two days.

Tuesday, October 2nd:

<As far as I'm concerned, there are no new pieces of information at hand. I keep intact my market opinions which have appeared in most recent letters - concerning the US Dollar particularly against the Canadian Dollar, and the GBP/JPY.>

Wednesday, October 3rd:

<The GBP/JPY has advanced today yet again. Its price appreciation may well continue, but from this point further I'd start paying some extra attention to the potential impact of an adverse, downward movement against one or more long positions entered recently.>

Finally, on Thursday, October 4th, alongside yet again stressing my outright bearish stance on the USD/CAD, I as well noted:

<I think there's a good chance the GBP/JPY will continue to go higher. Extra prudence is still required, though.>

Between its low and high recorded on Friday, October 5th, the GBP/JPY surged for about 200 pips.
Since September 27th - the day I started to update the pair's charts far more often than usual - the GBP/JPY went up for almost 450 pips.

Published on  Sun, Oct 7 2007, 10:17 GMT