This weeks GBP/JPY Analysis & Predictions

Every Monday since mid August, almost everyone including myself on this thread is predicting "that" big fall. I will post this analysis only to have a balance view on this thread.

Technical:
According to my strategy.. Daily charts are still very much bullish. 4hr tested the 200SMA once and as myself and lilmoe predicted it bounced back . Now the price is sitting on a deciding level.. Downward break from the current level will confirm a further fall.However to break 219 area daily QQE has to cross down.On the other hand if the price re-test the 200 sma, not only it will break that level, It will also limit any further bearish rallies towards 220 area and the price will be on it's way to 251+.

Fundamental..
Just early last week we heard on bloomberg , the stability of the financial markets and how investors are getting back in to the carry trades. Late last week, there were fresh news on how the UK is gradually falling into this this subprime "hole" and also the political uncertainty in Japan. At the same time hang seng index rose to all time high's, better than expected economic releases from the US and continues pitching's by world central bank leaders that there wont be a market crash like we saw on previous times. I must agree with Markam that things do not look good fundamentally. But when this big fall going to happen .. we don't know yet.

However I hope every intra-day trader should have a balance view on the market rather than getting married to this bearish mentality.

My strategy is clear and simple..as most of the traders here I'm an intraday trader. I take things as it comes, one trade at a time. I solely depend on my indicators. I have got a sell signal on my 4hr /1hr strategy on Friday with a profit target of 229.16. I'm looking to go short at a suitable price on Monday.

TTN ANALYSIS - MORE DOWNSIDE THAN UPSIDE FOR STOCKS THIS WEEK; CARRY TRADES TO REVERSE AGAIN?
- We've seen an anticipatory stocks rally ahead of the FOMC, raising the possibility that a rate cut will provide limited upside for stocks. On the other hand, if the Fed disappoints we can see some heavy selling of stocks. The USD/JPY has moved from a recent low of 113.38 (on 9/7) to 115.37 (on 9/14), suggesting that some money has gone back into the carry trade. If we had to see a selloff on Wall Street this week, the JPY could benefit once again from a renewed round of risk aversion.
Fed could disappoint stock bulls: What happens if the Fed chooses to leave rates unchanged, but cut the discount window rate again? Thomson Financial's economic team suggests that the Fed has clearly stated it seeks not to reinflate the housing bubble. The analysts suggest that the Fed is happy to see excess out of credit markets. Here's a suggestion: Instead of cutting Fed Funds, as the market expects, the Fed may cut the discount-window rate again, and leave the more widely used borrowing target unchanged. Thomson Financial's economic team suggests that the Fed can always cut later if that strategy fails. Why "risk monetizing high and rising commodity prices...as...in the late 1970s until more economic data becomes available"?

- Data to be released this week: A decent batch of U.S. economic is slated for release this week. Two pieces of data may move markets: CPI on 9/19 and TIC flows on 9/18.

- Worst case scenario for stocks: If the Fed had to disappoint markets on Tuesday, and CPI data on Wednesday comes in stronger than expected (which seems likely, since its about time we see the declining USD produce higher U.S. inflation). Higher inflation will undermine the case for more aggressive Fed easing, and jittery investors could run for the exits again.

- Best case scenario for USD/JPY bears: TIC data on Tuesday may make the USD increasingly vulnerable, and USD/JPY bears could benefit from a Wall Street selloff. A sharp drop in foreign holdings of U.S. Treasury bonds recently has raised concerns that China is quietly withdrawing its funds from the United States. In a client note entitled "Has China started to dump US Treasuries?", David Powell at IDEAglobal said the sales appear to coincide with early moves by Beijing to launch its new $300bn sovereign wealth fund. Why would China be quiet about these moves? Any evidence that China was pulling out would risk setting off an unstoppable stampede, which is why such a policy would never be announced.

HISTORICAL PERSPECTIVE: BARRONS TAKES A LOOK AT HOW STOCKS REACT TO RATE CUTS
- Since 1970, the S&P 500 has risen by an average of 5.5% in the three months after the central bank first cut rates, according to Birinyi Associates.
- Only twice out of nine instances did stocks drop, including an 18% drop three months after the Fed's 2001 easing. The average gain six months later is an even more encouraging 12.3%.
- On this week's expected Fed rate cut: "Given stocks' anticipatory rally, the potential downside from dashed hopes likely will exceed any potential upside from fulfilled expectations."

FED RATE CUT - LIMITED UPSIDE FOR EMERGING MARKET BONDS: IF THE FED CUT BY 50BPS, THE MARKET WOULD LIKELY RALLY BUT I THINK THE SELLING PRESSURE WOULD RESUME SOON AFTER THAT - NICK CHAMIE AT RBC CAPITAL
- "The longer-term negatives with regards to the subprime problems, the slowdown in the U.S. and higher risk premiums will weigh on the market in the long term."
- "We think the most likely scenario for the slightly longer term is one in which banks in the U.S. and Europe, helped by generous central bank action, gradually regain their willingness to lend on term and their ability to sell many of the assets that they wish to offload," he said, reaffirming his view that emerging debt spreads will end the year tighter than they are now.

Looks like the bottom support line held and a bullish wedge in the picture (yellow shaded area) is holding nicely so perhaps we may see this long await rise after all? Tomorrow could be the day this beast temporarily turns bullish.

For the past 2 weeks or so, price has been bouncing off the 38.2%, 50%, and 61.8% fib levels on the 4h chart, we also have a triangle, once it breaksout.. we will have a clear direction. 200ema (red line) has been a good resistance.

http://img259.imageshack.us/img259/7936/gjqc4.gif

Hi Kamostaji,
I can't find the EMA indicator at InterbakFX, what do you use?
Thankshttp://www.forexfactory.com/images/icons/dollar.gif

It's the Exponential Moving Average, 200 period, close

Sorry I haven't been more regular in my contributions on this weekly thread analysis. Here are some of my observations for this coming week. The Weekly Chart continues to sqeeze price as it has for the last month. A breakout is still imminent. We have technically had five straight weeks of inside candles (which this chart does not accurately show), which means we have had five consecutive weeks of higher lows and lower highs. As I stated last week in the regular thread, this kind of formation is unprecedented going all the way back to 1978, which is as far as my charts register this pair. I am looking for a breach and close above last week's high of 234.26 or beneath the low of 228.20. Price closed Friday not far from my Weekly 50 EMA which is around 233.

Here is a look at the Daily Chart. I have attached two trend lines to show the wedge that has formed. The bearish line comes in around 234.25 and the bullish line comes in around 228.38. Notice the QQE which is very close to crossing the 50 line upwards. This could be key to an overall bullish week for this pair, besides the fact that September is usually a bullish month for GBP/JPY, though price is the ultimate judge.

Here is the 4H Chart. I have attached two other trend lines showing an even tighter wedge than the Daily Chart. Notice price has bounced off of the 200EMA line three times now. I have also attached the Stochastics to show that price is presently overbought. I think we could see a move down, at least at the beginning of the week, based on this chart. Watch for breaches and closes above or beneath these trend lines and also the Daily Chart trend lines posted above.

One final chart of the Monthly Chart. Though September is not over, look where we stand right now. We are only about 30 pips away from where we opened the month. September opened at 233.43 and price is presently right around 233.14. This will indeed be an interesting week.

I know this is not strictly G/J , but it has some time analysis that is likely to impact it so here is my DOW chart. As you can see, the cycle lines (light green) have been very accurate in determining reversal points (or big moves). Now the next one is scheduled at the end of this week (Fri 28th of September) and that is the day I am expecting the next big move. Price could just hover around this current area until such time.

Interestingly, I have a trader friend who has done some Gann analysis on G/U with a time point on that same day, so adding some weight to this analysis. That could be the turning point not only for DOW and G/U but G/J and many others. Now I am expecting a reversal but keep in mind that it could go the other way, so be prepared. Perhaps we could double up on the high before the direction is determined so lets wait and see.

Grrr, so now I update my MT4 chart and it has come up as Monday, 1st of Oct. Anyway, be prepared for a sell off on Friday or Monday. I think late Friday session is the most likely time (I've put a timeline in the chart to display the date).

Thankshttp://forexfactory.com/images/icons/dollar.gif

I have realised that the DOW chart above has the weekend factored into the current cycle. It's an MT4 thing and I assume that come Monday, the weekend will be removed. I assume that will push the timing out by a couple of days.

GJ has broke to the upside as we know but we have a very strong resistance at 235.20-45, if this resistance is broken then 238 is definitely a target (Zoran's target for several weeks). A 50% retracement is possible first to 233.70 area where we also have 50ema.

I would just like to respond to this comment. The Gann time point last friday kicked in. At the time of the post I was expecting a fall but it ended up being a 300 pip up move (with possibly more to come). The thing about these time points is that you can expect a big move but the direction or reversal is not guaranteed.

It amazes me how different systems confirm each other. Fibs line up with S/R, MAs, pivots and other systems that I (and others) observe.

My levels are primarily based on S/R that were formed before the fib levels (or other systems) came into play, so the confirmation just adds weight. We have come to the third resistance level of 235.30 and my long positions were closed just below that at 235.19 (with a Friday high of 235.26). The last resistance level is 235.50, the top of the range over the past few weeks, which is the extreme. I am now expecting a retrace of sorts although it could still go up a bit more (probably no higher than 235.50). Also, being a Sunday - price can move around a bit more freely so there is a bit more uncertainty.

Anyway, I will be looking for a short on this potential retrace with a first target around 234.5 and a second target around 233.5. I will then look to go long depending on the action at those points. A word of caution to newbies - do not follow unless you have some proven MM in place. Targets may not be met, but the trades should still be profitable.

On the long, the first potential reversal point is in the 238 region (as mentioned many times before - although I have had my doubts at times). There should be a fairly large and profitable bounce (and expected reversal) off that area back to the 235 region. The problem now is that the 235 region will provide very, very strong support so it will take time to break unless there is a panic of sorts.

So having said that, 235 could hold and break 238. In that case, 244 is the next level. Another resistance level but since I use the 78.6 fib level (instead of 74.6), I have a slightly higher fib point (but they are still fairly close). The final level is 247.3.

So I am expecting a big fall (back to 221) but I am also expecting one final spike up. So it's not necessarily an easy thing to trade. Also, I'll be looking out for signs of a bear trap. One can never be sure!

Chart attached with the blue shaded area forming a bearish Gartley - with a potential reversal at 238.80 (78.6 level not shown but comes close to the indicated 61.8 level). The purple shaded area is our current range (with a high of 235.50) and finally the ascendling red line is the major bullish indicator - which resembles an ascending right-angle triangle (with the resistance being the top of the range) although it is not so cleanly cut.

So they are my short to mid term views but I will be playing the intraday charts for my daily trades.

Just in case it wasn't clear. 235.50 is the key (and extreme) point of resistance. If that breaks north (before any potential retrace) then I'll be in long with a stop below that point. My stop on any shorts will be above 235.5 so I will be looking for an entry as close to that level as possible (though scaling in).