Talking Points:
- The Iron-Clad 100-Period EMA
- 2 Big Rallies That Originated from This Support
- A 600-Pip Rally That’s Possible Now
One of the trickier elements of moving average trading is realizing that certain pairs respect certain moving averages on certain time frames. There is no universal moving average strategy, but looking back at what happened recently on a particular pair can offer clues as to what may happen in the future.
A perfect example of this can be seen on the four-hour chart of GBPJPY, where the 100-period exponential moving average (EMA) is providing some support for the third time since November.
The first time the 100-period EMA provided support was back on November 12, and that sparked a roughly 1,000-pip rally before another pullback to the 100-period EMA, this one happening on December 17.
The December test sparked about an 800-pip rally, and now, this morning, we saw GBPJPY touch and bounce off this key level for a third time.
Guest Commentary: Proven Moving Average Strategy in GBP/JPY
Even if we continue to see diminishing returns on the strength of the bounce, a 600-pip move higher is not out of the question. Only time will tell, but so far, this particular moving average strategy is alive and well for GBPJPY traders.
By Liam McMahon, Currency Strategist, GlobalFxClub.com