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Daily GBP/JPY analysis

  • #13,401
  • Sep 12, 2007 12:36pm Sep 12, 2007 12:36pm
Quoting ForexPips
I am curious about something- and have been for a while:

Newstrader posted this whole thing about the relationship of GJ to its pairs ie: Since you obviously don't know-i'll tell you.

GBP/JPY = GBP/USD x USD/JPY. The price of G/J equals the price of G/U times the price of U/J.

That's how u make the big pips trading G/J-when ur in a nice sustained carry trade trend...

I keep thinking about this and don't understand the big deal. I would expect all crosses to have this relationship. I finally actually looked at some other crosses and find this to be true. I am curious if any math majors out there could explain to me why this relationship would NOT be true. It just seems to be a natural occurence.

Any input would be appreciated.
You're 100% correct and it's good that you have seen that connection.

Imagine all the pairs as resting on counter weighted scales that are all connected to each other like a giant spider web of forex.

When one is influenced by external forces, it pushes and pulls on the others but not in equal proportion. Some it moves more than others and some much less....but it moves them regardless. If even only a couple of points.

The whole market is inter-connected and externally connected to other markets with the same type of influential connection.

There is no such thing as an isolated, self regulating forex pair....or market for that matter.
Capital Preservation is key to long term wealth accumulation
  • #13,402
  • Sep 12, 2007 12:40pm Sep 12, 2007 12:40pm
Newstrader abandoned that idea pretty quickly, probably because he was told how utterly useless it was.

To put it simply all that is happening is the two repeated currencies are canceling each other out. It is like for example

one half multiplied by two wholes equals one whole

1/2 x Y = Y divided by 2 so if Y=2

1/2 x 2 = 1

or

1/2 x 2/1 = 1

or

(1 divided by 2) x (2 divided by 1) = 1

NZD/SGD x SGD/JPY = NZD/JPY
EUR/CAD x CAD/JPY = EUR/JPY
AUD/NZD x NZD/USD = AUD/USD

I saw Newstrader actually say in a chatroom at the time "this is the greatest thing since e=m2*). I did not want to embarrass him by saying anything but the so called formula he discovered is worthless. It has absolutely no logical use in the market. Unless you are trading GBP/JPY but for some reason you can not see the price of GBP/JPY instead you can see the price of GBP/USD and USD/JPY.

Or

You can only see the prices of GBP/AUD and AUD/JPY

or

GBP/NZD and NZD/JPY

or

GBP/CHF and CHF/JPY

You get the picture

(do not have a 'divided by' character on my keyboard so I used the words)
  • #13,403
  • Sep 12, 2007 1:06pm Sep 12, 2007 1:06pm
  •  MPP
  • Joined Jun 2007 | Status: Be yourself, everyone else is taken | 2,734 Posts
Some people use this calculation for hedge trading, it allows you to keep funds balanced and gain on the interest etc. not entirly sure how it all works,

http://www.myfxreport.com/hedging.htm

MPP




Quoting Groovenator
Newstrader abandoned that idea pretty quickly, probably because he was told how utterly useless it was.

To put it simply all that is happening is the two repeated currencies are canceling each other out. It is like for example

one half multiplied by two wholes equals one whole

1/2 x Y = Y divided by 2 so if Y=2

1/2 x 2 = 1

or

1/2 x 2/1 = 1

or

(1 divided by 2) x (2 divided by 1) = 1

NZD/SGD x SGD/JPY = NZD/JPY
EUR/CAD x CAD/JPY = EUR/JPY
AUD/NZD x NZD/USD = AUD/USD

I saw Newstrader actually say in a chatroom at the time "this is the greatest thing since e=m2*). I did not want to embarrass him by saying anything but the so called formula he discovered is worthless. It has absolutely no logical use in the market. Unless you are trading GBP/JPY but for some reason you can not see the price of GBP/JPY instead you can see the price of GBP/USD and USD/JPY.

Or

You can only see the prices of GBP/AUD and AUD/JPY

or

GBP/NZD and NZD/JPY

or

GBP/CHF and CHF/JPY

You get the picture

(do not have a 'divided by' character on my keyboard so I used the words)
  • #13,404
  • Sep 12, 2007 1:52pm Sep 12, 2007 1:52pm
Quoting Wolf.
Just my novice view.
Stop calling yourself novice!!
  • #13,405
  • Sep 12, 2007 2:09pm Sep 12, 2007 2:09pm
Quoting Zoran
Stop calling yourself novice!!
  • #13,406
  • Sep 12, 2007 5:23pm Sep 12, 2007 5:23pm
Here is a possible Guppy scenario. Caveat being that 227 must hold. Reversal target will be 238 though there is a small chance it could go to 244.
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  • #13,407
  • Sep 12, 2007 6:07pm Sep 12, 2007 6:07pm
Quoting Zoran
Here is a possible Guppy scenario. Caveat being that 227 must hold. Reversal target will be 238 though there is a small chance it could go to 244.
Tasty I hope ....The Dictionary

Like your analysis though.

Bedtime for me goodnight.
  • #13,408
  • Sep 13, 2007 12:27am Sep 13, 2007 12:27am
Quoting MPP
Some people use this calculation for hedge trading, it allows you to keep funds balanced and gain on the interest etc. not entirly sure how it all works,

http://www.myfxreport.com/hedging.htm

MPP
That is not what he was using ti for and he definitely did not discover this. It is a simple equation that is useless in the way he was using it.
  • #13,409
  • Sep 13, 2007 2:42am Sep 13, 2007 2:42am
What a day, the whole of the 125 pip range came in the 50 mins of the bounce from 08:00EDT, the rest of the day was flat.

After that, there was a lower high on the 5 min at 11:15 which was good for a 30 pip scalp and if you´d drilled down to the 1 min chart, the 5 pip lower high of 231.98 at 21:54 was good for another 30 pip scalp.

For now, the market is in a 60 pip range between 232.04 and 231.44 and until there is a sustained break outside of this range I´ll scalp off my 1 min chart. NB M2 today is in at 231.53, so this might initially act as support.

Yesterday was the narrowest range of the past 4 full trading days - actually for many days. Tony Crabel, a great exponent of Volatility Trading, classes this as a NR4 day and after such a day basically places breakout orders both above and below yesterdays range. He also states that volatility is more cyclical than price - this implies that once this range breaks we can expect another cycle of increasing volatility. I cant wait!
Trading Levels with WRBs
  • #13,410
  • Sep 13, 2007 3:05am Sep 13, 2007 3:05am
Good Morning,

Can this lower trend line provide sufficient support, just need to break the monthly pivot!
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  • #13,411
  • Edited 4:50am Sep 13, 2007 4:33am | Edited 4:50am
A picture paints a thousand words!

Edit: Does this look long to anyone else?
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  • #13,412
  • Sep 13, 2007 4:36am Sep 13, 2007 4:36am
So the fight continues...cable is slowly falling, now at S2 and UJ rising, just hitting its R2 line. GJ broke its very narrow overnight range and followed UJ higher , but still under yesterdays high at 232.50 and not yet breaking up.

As long as UJ holds at R2 and cable continues downwards, it will be good for a short, but IMO safer to remain on the sidelines.
Trading Levels with WRBs
  • #13,413
  • Edited 5:46am Sep 13, 2007 5:31am | Edited 5:46am
Movement at last.... Just need to break the upper trend line on the hourly chart 233 area and hopfully have a more sustained move up.

Above R1 now looks good.

Text book entries this morning at the london open.

Will be nice to break this September ranging market, we need some of July and August's volatility.

Edit: probing the 1 hour trend line may reverse or retrace here maybe to R1
.
  • #13,414
  • Sep 13, 2007 6:29am Sep 13, 2007 6:29am
LOL, I really must pay attention to my own charts and take their signals...the 3rd / 4th time that the 231.50 area (M3) held was a clear buy - even for a scalp back to the 232 level.

But, as often happens with lower TFs, that entry led onto a larger move as UJ made new highs and dragged GJ up with it. That 100 pips would have been nice!
Attached Image
Trading Levels with WRBs
  • #13,415
  • Sep 13, 2007 7:06am Sep 13, 2007 7:06am
Quoting Wolf.
A picture paints a thousand words!

Edit: Does this look long to anyone else?
Nice to see that descending trendline finally broken. My first target is 235 and then 238 (as shown in my chart posted yesterday).
  • #13,416
  • Sep 13, 2007 7:50am Sep 13, 2007 7:50am
Quoting Islander
LOL, I really must pay attention to my own charts and take their signals...the 3rd / 4th time that the 231.50 area (M3) held was a clear buy - even for a scalp back to the 232 level.

But, as often happens with lower TFs, that entry led onto a larger move as UJ made new highs and dragged GJ up with it. That 100 pips would have been nice!
LOL Islander...I must say I was suprised you weren't part of the initial move (your slacking)

Plenty of opportunity to join the move though, hopefully Zoran's targets of 235 and 238 will be realised.

So far today's move is a great match for your chart prediction Zoran.
  • #13,417
  • Sep 13, 2007 1:13pm Sep 13, 2007 1:13pm
Quoting Wolf.
LOL Islander...I must say I was suprised you weren't part of the initial move (your slacking)

Plenty of opportunity to join the move though, hopefully Zoran's targets of 235 and 238 will be realised.

So far today's move is a great match for your chart prediction Zoran.
Well I did hop on the rally on a pull back to the 34 EMA earlier and got out at the 34.50 level as momentum was falling and UJ put in a lower high.....late for me now, so I´ll post a chart tomorrow.
Trading Levels with WRBs
  • #13,418
  • Sep 13, 2007 4:25pm Sep 13, 2007 4:25pm
well I'm hoping for a huge G/J turn around...I say the GBP had its run...now let the USD and JPY have some fun
  • #13,419
  • Sep 14, 2007 6:09am Sep 14, 2007 6:09am
The add-on / continuation buy that I mentioned in my last post is taken when in an uptrend, price retraces back to the area of the 34EMA (agua) - the green arrow - this was actually the 4th during yesterdays rally. I actually closed my longs after R1 at 234.76 was hit.

The rolling over of the 34 EMA with the stochastic under its 50% level gave a geart sell, which was very fast, holding under the 8 EMA (yellow) and bouncing along the lower agua band.

The retracement stopped at the 61.8% level / pivot for another short entry - I´m flat now having closed on the last spike down...a nice doji.

So far, this fall has been driven by cable´s drop - UJ is stuck around its pivot - I guess waiting for US traders. I´m looking to sell again around the 34EMA
Attached Image (click to enlarge)
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Trading Levels with WRBs
  • #13,420
  • Sep 14, 2007 11:16am Sep 14, 2007 11:16am
I am both short and long at the moment, not a hedge just two different systems. The short from 232.75 is close to giving me a long signal, the long I took from the good old 4hr trend line 230.41.

The long entry I hope is the reject of the trend line to take us north.

So my bias is still long overall, but time will tell.

Have a good weekend all.

Edit: I missed the move down last night I knocked off early, stopped out of my longs at 234 ( Really p**sed me off lol)
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