Swing-ing the GBPJPY

I've noticed that the most discussed thread on GBPJPY focuses more on intraday and very little is going on about the wider scope. So hopefully this thread will be useful to swing traders and more people can contribute.

Anyway my personal view for this pair is for it to break through its previous high at around 250 and I've been going long and buying dips. So far it's been doing well and I'd just like to share my reasons.

Firstly, fundamentally this pair yields the highest interest and even if the Mervyn King slash interest rates or the BOJ increases interest rates, the yield will be still too good to ignore.

Secondly, after the sub-prime crisis this pair has been heading up and resuming its trend. Sure there's been some consolidation and ranging periods but its always been breaking upwards.

Contributions anyone?

Yes, I agree with what you said. It does seem that a lot of people do focus on trading this pair intra day. I would imagine the vast majority of people who trade the pair intra day will lose, the spread is such a big hurdle to beat if you make several trades a day, as it is with most pairs.

Buying after major carry unwinds has been a good idea for years with this pair as it's essentially only been trending one way since late 2000. Like you said the big interest rate differentials between the two nations make it very appealing for big hedge funds and banks to get in on the carry trades. Also, if we look historically at the pair, it has been much higher in the past, even over 500 yens to a pound. The uptrend can't last forever, and there is always the risk of a very major unwind like in 1998, so I think its a good probability trade if you get a good dip, but you need a plan to limit your losses in case of another 1998 style collapse. Of course, the longer you hold the position the more you earn on the swap, but it's never going to be enough to cover a major unwinding.. Just my two pips..

Good posts, especially as I'm n the other side
My view is that to consider this a LT buy, it has to at least get through the resistance formed by the Jan 23 high - around 241.70. Although it has been well supported by the trendline from the crash low in August, it's been in consolidation since the 7th of this month, roughly within 1 ATR(14) of the resistance level, and has over the last several days dropped enough to be testing the rising support. Whether it breaks the support or not remains to be seen, but as JPY is showing some strength against others as well my guess is that there is a good chance it will get broken - in which case the next downside target would be around 230 (the last bounce off the trendline), with an upside resistance of the lesser of the trendline, or the 241.7 level (above those we are back into a long). As for the actual carry value, I don't know how attractive it is when measured against the volatility.

From a more fundie POV, unwinds tend to take time to unravel - particularly in this case as the money hasn't gone into just straight interest carries, but to support loan money for all sorts of things, from sub-primes to CDO acquisition to M&A to stocks, which have to be covered in one way or another before the yen get repatriated. But right now the future is rather muddy, so I have to play it day by day....

In support of a bearish POV, note that the pair is forming a nice descending resistance line from the highs on Oct 15th (clearest on the hourlies);on the dailies we have just past a cross of the -DI over the +DI. A bit of a worry is the rumour of Kampo buying in the 114.50-115.50 range in USD/JPY - note that pair is also just crossing down over an upward supporting TL from the crash lows - although the buying doesn't seem to have been too effective.