Did BOJ headlines change my GBPUSD playbook this month?

[LondonScalper]

Short answer: a little, and not in the way I expected.

GBPUSD is supposed to be my clean pair for London mornings. It has nothing directly to do with Japan. But during September the BOJ was in the news repeatedly, with comments and reports about policy hitting the wires at odd hours, and USDJPY moved hard on several of them. That spilled into the dollar more broadly, and GBPUSD felt it.

What I noticed in my log for September: four mornings where a BOJ-related headline during the Asian session or early London moved USDJPY by more than 80 pips. On three of those four mornings, GBPUSD opened London with a wider-than-usual Asian range, around 45 pips instead of my typical 25 to 30, and the London open range breakout I usually trade failed on two of them.

So I made one change for the rest of the month. If USDJPY moved more than 60 pips during the Asian session, I halved size on my first GBPUSD trade after 07:00 and required the breakout to hold for two M5 closes instead of one.

It's too few observations to say whether that helped. On those days I made slightly less on the winners and lost slightly less on the losers.

What it did change is my morning check. I now look at USDJPY's overnight range before I look at GBPUSD, which I wouldn't have thought to do a year ago. Did anyone else see cable behave oddly on those mornings?

[Shadow Trader]

Yes, I noticed it too, though I trade cable less than EURUSD. On two of those September mornings the GBPUSD Asian range was well over 40 pips, and the London break ran about 10 pips and came straight back.

The attached chart is an illustration of the pattern as I see it. A USDJPY headline impulse during Asia drags the dollar, cable prints a wide Asian range, and the 07:00 break fails because the move already happened overnight.

img_13117.png (91.4 KiB) Viewed 31 times

Your two M5 closes filter makes sense. I'd add a range filter on cable itself, not just on USDJPY. If the GBPUSD Asian range is already above about 1.5 times its 20 day average, I skip the breakout and only look for a fade back inside.

Checking USDJPY first is a good habit regardless of the BOJ. A big yen move often means a dollar move, and cable rarely ignores that. Do you also check EURUSD overnight, or is yen the one that tells you most?

[PTScalper]

Yes, I noticed it too, though I trade cable less than EURUSD. On two of those September mornings the GBPUSD Asian range was well over 40 pips, and the London break ran about 10 pips and came straight back.

The attached chart is an illustration of the pattern as I see it. A USDJPY headline impulse during Asia drags the dollar, cable prints a wide Asian range, and the 07:00 break fails because the move already happened overnight.

img_13117.png

Your two M5 closes filter makes sense. I'd add a range filter on cable itself, not just on USDJPY. If the GBPUSD Asian range is already above about 1.5 times its 20 day average, I skip the breakout and only look for a fade back inside.

Checking USDJPY first is a good habit regardless of the BOJ. A big yen move often means a dollar move, and cable rarely ignores that. Do you also check EURUSD overnight, or is yen the one that tells you most?

Hi Shadow Trader,

interesting, thank you for sharing that chart, its usefull

[Shadow Trader]

PTScalper, glad the chart helped. The follow on question I still sit with is whether EURUSD overnight tells me as much as USDJPY on those mornings.

On the September days where cable's Asian range was already wide, EURUSD had usually moved a similar fraction of its own average overnight. When euro was quiet and only yen was wild, cable's London break failed less often in my notes, though the sample is tiny.

So the filter I use now is stacked. USDJPY over 60 pips in Asia halves size, and if GBPUSD Asia is also over 1.5 times its 20 day average I skip the breakout entirely and only look for the fade back in.

Two M5 closes on any break I still take remains. The stacked filter just decides whether I am allowed to look.

LondonScalper, on the mornings where only yen moved and euro was calm, did cable still feel off at 07:00, or was that mostly a both dollars moved story? My notes favour the second reading.