Riding GBP/JPY’s Post-Election Rally

GBP/JPY bulls must be very pleased with what November brought them. The pair has been steadily rising since the U.S. election, which caused a decline to 126.70. Nine days later, today GBP/JPY climbed to as high as 137.57 and is currently hovering around 137.10. Could this impressive rally be predicted, especially after the strongly negative initial reaction to Donald Trump’s presidential win?

On November 4, four days before the U.S. election, we received an order to make an on demand analysis of GBP/JPY for one of our clients. As always, it was a multi-time frame analysis with a lot of explanations, but the third chart was probably the most important one for trading purposes. See it below.

1-Hour GBP/JPY

As visible, the Elliott Wave Principle suggested GBP/JPY is likely to rise in wave 3 of C and we should “anticipate a 1000-pip recovery from now on” as long as the low of wave 2 of C holds. This meant that 126.48 was the perfect level for a stop-loss order for long positions, while targets above 137.00 were plausible. The updated chart below shows GBP/JPY’s development since that forecast.

1-Hour GBP/JPY

The post-election slump came dangerously close to 126.48, but instead of breaking below it, the pair reversed to the north to gain almost 1100 more pips so far. Trump’s election came as a shock to us. GBP/JPY’s advance, however, did not. That is how valuable the Wave Principle is. Even in the most unpredictable political times it could still give traders an idea of what to expect next, while also providing a key price levels to guide them. The rest is patience, which our client obviously had, because several days later we received this response from him: “Could you please send me another link so that I may purchase another GBP/JPY assessment. Your last one for this week has worked out great. Thank you very much.”

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