Daily Forex: Trading GBP/JPY
Trading forex cross pairs can be difficult for new traders as they look at the forex cross pair individually and not in context with its major pairs. A forex cross pair is a derivative of two majors. For instance EUR/AUD is a derivative of EUR/USD and AUD/USD. In this video we discuss how to trade GBP/JPY.
When trading GBP/JPY it is important to identify the key support and resistance levels on GBP/USD and USD/JPY. Once identified we want to watch how price reacts on the two major pairs to trade the cross pair.
A good example of this occurred between July 18th when the USD/JPY price was falling and GBP/USD price rejected key resistance of 1.3000. The catalyst of GBP/USD moving lower from this level and USD/JPY trading lower saw GBP/JPY prices drop significantly lower.
It’s important to remember, when you think GBP/JPY will move in a direction think:
- GBP/JPY Lower = GBP/USD lower and USD/JPY lower.
- GBP/JPY Higher = GBP/USD higher and USD/JPY higher.
- GBP/JPY Ranging = GBP/USD ranging and USD/JPY ranging.
Ultimately, we can think of using the two major forex pairs as an index for the cross pair. Similar to how traders use the DXY (USD Index) to trade EUR/USD and other USD related forex pairs.
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