Daily Forex Market Update: Being Short on the GBP/JPY Today
Today John Putman added to his daily market update four charts to better demonstrate the instruments' circumstances. See and read
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ABOUT THE AUTHOR: John Putman II is a full-time trader and managing member at FX Analytics, a third-party research provider focused on exchange rate modeling, economic complexity, genetic programming and distributive computing.
In early trading we saw the Aussie, Euro and Pound Indices all gain ground. The Kiwi weakened overall while the Swiss and Dollar remained relatively unchanged. The Pound Index is slowly approaching resistance which is a good thing as I’m on the wrong side of a GBP/JPY trade and can use all the help I can get, and the Kiwi is sitting at its macro support. These two may warrant further analysis as there may be potential setups in the underlying pairs. The balance of price action in the other exchange rates is relatively neutral.
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In the matrix this morning, there are 16 regression signals, six of which have cyclical support, but only two aren’t suffering from counter-momentum. Those will be put aside until this afternoon and then reevaluated. Of the two that are left, GBP/USD and NZD/CAD, the latter is of more interest to me at this time. I’m currently short the GBP/JPY, and taking a beating on it, and the correlation between that and the GBP/USD is just a little too high, I’d likely end up with unintended leverage by adding it in. While the correlation between the GBP/JPY and the NZD/CAD is actually negative, getting long the NZD/CAD while short the GBP/JPY actually puts it in gear to a small degree. Difficult to squeeze out all the risk.
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It does take a special kind of trader to handle the dragon profitably – you've got to be always on the ball with it
Mick, you’re absolutely right. I’ve noticed over the years I have to account a lot more for complexity (the ball) in my work, or at least try to . This has become really apparent on the machine learning side of things. Ten years ago I could build a single model from a single data-base structure and have a model that worked reasonably well for several months. Now I need to build multiple models from multiple structures and chain them together. Operationally it adds a lot of over-head to the process, never seems to get easier. – JP
An update on the positions. I added the long NZD/CAD to the mix, it’s basically flat at this time, tenth of a percent in the black.
The GBP/JPY has slowed and I’m pretty sure no matter how I slice it this one is coming off the screen a loser . I’m in the red on that trade about 1.5 %. If it trims back to something > 1% I’ll consider myself lucky. Will reevaluate this evening and re-balance as needed. – JP
Honestly Put Man, you must learn Regression and all its moving parts before you actually trade it or you will lose everytime