GBP/JPY - How long before the other shoe drops ?

Hello All !

Back when I was first starting out and only trading futures (those were the days),
I allways looked for patterns and one of my favorite patterns was the Head-and-Shoulders formation.
It was and still is one of the most misused trading patterns and very often, while forming
it is signaling a consolidation, a 4th wave, an "expanded flat" or something of the sort
and UNTIL H/S is CONFIRMED, very often it's not a top at all.

By confirmed I mean a clear BREAK of the neckline and then preferably,
a re-test following the break which fails to resume the prior trend and then follows thru.
Using the daily closes instead of the daily extremes to draw the neckline was another thing
that I found to be a useful filter against intraday market noise.

Without the confimation, many times I found myself thinking,
".... Oooweee, Head and Shoulders !!!.... Here we go !!! "
only to see the left shoulder broken, the prior top challenged, sometimes taken out and on to
a new high for the move. I found that when the "B" wave of an "A-B-C correction" was violated,
usually that was a good indication that the H/S pattern was just a consolidation
and was ready to resume it's previous trend. I realise that some of that is
a bit too Elliot for some of you, but, it's what I used, often still do,
and it worked for me and I find it easier to explain in those terms. SO, that's that.

Now, having said all that, I would like to address the Pound Yen.

If I could actually speak to the Pound Yen, I would tell her,
"...I love you... I could have never done this without you...You mean the world to me...
everything I've come to know about forex, I owe it to you, baby..You're the greatest !!! "

I would also tell her, " You B**ch, I hate you !!! I've never seen anything worse than pound/yen...
You give me money and then take it back and give it to someone else....
What kind of monster was your mother ? Did I mention I HATE YOU ?

Anyway, I've attached a image of what MIGHT BE a "you know what".

I've been looking at this develop for nearly a year now and although fundamentally the
carry-trade is still the main game in town, an unwind is likely to occur.
Of course, it would be an excellent opportunity to buy it again and ride it back up there,
but, I'd still want to see the 220's decisively broken with closing prices (5pm est) confiming the move.
Otherwise, even with the BOE in easing mode, the BOJ eventually raising rates after 6 years
of ZIRP, the Bps spread is still hundreds of basis points and will be exploited.
Even if BOE eases down to say, 5.00% or even 4 and 1/2 and Japan goes 100-150 bps more,
the yield is still considerable. So the carry trade will not die, it will simply evolve.
I'd welcome a 2000 pip drop in G/J. I'd buy it with both hands.
If we see 200 yen to the pound, I wanna own it. 285/300 by the end of the decade.

So here's a chart. It's worth every penny you paid for it. :-)

I feel the same way! And I don't like it....

I think it may have a brief rally with the U.S. equities this week due to the pending rate cut. I think then it will fall to the 220 region maybe lower.

The 220 target is a good one in my book. 219.23 if you want the exact number. However this trade range is huge, up to 241.34. So it could go up or near that area first ( I highly doubt it) but if it does it needs to come back down and fulfill it's obligation to 219.23 target. Only fundamentals are keeping it away right now. If it breaks 219.23 look out! Of course this is just my humble opinion....what do I know Quite frankly I don't care where it goes as long as I'm around to board the train.

Wow, the only accurate analysis on this board and no responses.

Maybe if Skunny had 12 cool indi's on his chart it would've generated some interest.

Well, it's been 3 months since this thing hinted which way it was going.
(or, atleast I started paying attention 3 months ago)

After almost 3 months of negative interest, I think I've about had enough.

Was hoping to see 200 to take a stab at it again.

Maybe will buy an option instead.

Anyone else holding out for 198 ~200 ??

Hi,
it went down yo 203 area and now it is bouncing off.
Could you please tell what you expect now from GY?
I am not sure I understood your post

I'm not sure I understand my post either. Glad we agree.

From a fundamental standpoint,
my work suggests Pound/Yen will aggrevate the fundamental sh*t out of my trades.

Technically speaking,
The 50% ret. of Sept. 2000 Low to July 2007 High (199.64 long term chart)
has yet to print and with both components of the pair where they stand
at the moment, one of them will have to bend over for the price to get there.
Otherwise, we could be waiting for a while. I'm getting old.

The Yen has met a huge, if not historic objective by printing below the 102 vs. USD
It may not want to cooperate for very much longer. So maybe the Pound:
If Sterling can take a little licking maybe it G/J could still print 200.

Then I want some. And I want some of the currency too!! That's about it

So you think that this will fall to 199.64 (50% fib) and then will go up?What
if this will brak 198 and keeps on falling down ?
Thanks!
PS: at the moment I am out of this

If it do this, it fall down - go boom. make big noise.

What would a .618 be worth ? another 1000 pips or so. anything's possisble.

Seriously, I think what I was trying to impart was 2000 pips drop was enough of
an unwind for me to consider the possibility that it's been a while since carry trade
was pumping and maybe a little pump here and there would do it some good.

But if it took almost seven years to get where it did and only 7 months to
retrace nearly half of that move the market definately has developed a bias.

Take a read on the weekly chart. Go back to atleast 1995. That's like a million years ago.
There's been alot of action on this pair. It's a good pair to test for history and there's
alot of history available for both of these going back to post WWII era.

I've got a 200 year chart of the Pound that would make you go "wow".
4 Bucks. That's the real price. Ben Franklin said so. Whatever.

If I take everything I know about it and add everything you know about it
we still don't know enough about it to say for sure. If you're flat right now,
remember, that's a position too - as long as you know why you're flat.

be good.