Cross-Eyeing: Fib Play on GBP/JPY - PT1 Hit

We saw some pretty wild trading last Friday, as the currency pairs were all over the place. Once the London session opened, we saw the pound falling across the charts. Guppy dropped by 150 pips over the span of 3-hours and it looked like it was headed for new lows.

Luckily for me, the wave of risk aversion was short lived as the bulls came back in force. Taking a look at the charts, we can see that the 61.8% Fib held pretty nicely. This also lined up nicely with a major rising trend line. I suppose many traders were eyeing this level.

In any case, the pound remained resilient and midway through the New York session, I hit my first take profit. I moved my stop to break-even, giving me a risk-free trade now. Now, I know I said I was gonna let my remaining position ride, but it seems that the pair has formed a channel on a longer time frame and is now encountering resistance at the top. I may have to cut this short and find a way to re-enter if it seems like bullish run is losing steam.

Trade Idea: 2010-11-12 00:10

I've been scanning the charts and it looks like the pound is being resilient. It's been on a major roll against the euro and has been holding its own in the face of dollar strength. The reason for this?

Apparently, currency bulls have been tripping over themselves in buying the sterling after the Bank of England's inflation report showed that steady growth predictions are still in place even with the economy's inflation concerns.

The markets also got a kick out of finding out that the BOE fellas are still tossing coins over quantitative easing, which suggested that the economy might not need one after all. Meanwhile, the markets starting losing its love for the yen when less-than-stellar economic reports popped up from Japan this week.

Technically, I see that GBP/JPY has broken past a major descending trend line. This gives me reason to believe that this pair could be headed for new highs.

I've popped on the Fibonacci tool to help me find a good entry point, and as it turns out, I see that the 38.2% Fib level lines up with a former high. In addition, the 50.0% Fib lines up with the former trend line, while the 61.8% also coincides with former resistance levels.

While any of these levels may hold as support, I will be placing my buy orders at 132.00. Stochastic has yet to crossover, so I may still have a chance of getting triggered. I'll be placing a stop of 140 pips, which is equal to the pair's daily ATR.

My first take profit will be at the recent high at 133.25. At that point, I will lock in profits and let the rest of my position ride while moving my stop to my original entry point.