At last the Japanese Yen is trending on some positivity. In the Asian session, the Yen gained across the board as GDP for the second quarter expanded and easily beating expectations. According to analysts, by growing at an annualized pace of 4%, this represented the sixth successive quarter in which the economy has expanded in part due to increasing capital expenditure and consumer spending brought by increased domestic demand. Data also shows that there is increased expenditure on durable goods-private consumption which contributes about 66% of the GDP expanded to 0.9% which in turn pushed the annualized GDP growth for April-June to 1.5% and real inflation to 0.4%. Remember, in the first quarter real inflation grew by 0.3% and so, this is a back to back growth in inflation which should be encouraging for BoJ. Despite the tight labor conditions, economic growth is expected in the coming quarters as manufacturing and service sectors improvement should encourage consumption as investors become more confident of future prospects.
It is for this reason that I’m trading the GBPJPY and looking to short. The current set up in the weekly chart means we only take short positions once a sell signal is printed in the 1HR chart. Well, at the moment, there is a sell signal and a retrace after that steep rise from Friday. A sell signal has been printed by the stochastics with lower lows from the upper BB in the 1HR chart.
I will wait for a break below 142.30 and initiate a short with stop loss above 142.80 and a 1:2-3 risk reward ratio. This will turn out as follows:
Sell Stop: 142.30
Stop Loss: 142.80
Take Profit: 141.30
Have a good trading day.