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Pound/Yen - Defining a Bounce
By Eliseo Agas | August 22, 2007
Shorting into the JPY crosses after the tremendous free-fall they’ve had the past couple of weeks is definitely a high-risk idea and not for the timid. But since we like eating risk for breakfast let’s consider this idea…
Following up on my previous post, I find it more comforting to wait for a bounce after a strong selloff or downtrend before potentially getting into a short. On the Daily chart for GBP/JPY we have this bounce developing. What is the risk? The risk is that the current buying could go higher before potentially coming back down. Continued buying could be likely given the circumstances so beware getting in too early.
If it breaks higher at this point there could be a lot of follow through as bulls pile in to reestablish their carry trades. This is definitely the scariest part of this idea and would crush the short. But no risk, no reward, right? Just make sure you have your stops in place if you decide to get into this. Or, you could also wait on the sidelines to see more selling pressure develop first before timing your entry.
Tags: carry trade, forex, forextrading, jpy
Topics: Better Use Charts - Use Charts Better |
August 28th, 2007 at 9:04 am
[…] through on my previous post. The GBP/JPY bounce now seems to be weakening and the sellers are trying to come in and see what […]