Welcome to a new edition of Clarity Edge.
This newsletter is written and released every Monday morning during the London session.
Each week, I share my outlook on the Forex market, while also keeping an eye on crypto, commodities, and the major indices.
GBP/AUD Long Setup
On the 4-hour chart, GBP/AUD has just produced a strong impulse move. Overnight, price tapped perfectly into the local long reload zone, the area beginning below the 0.618 retracement. I’ve marked this test with a red circle on the chart.
What makes this setup stand out is the confluence:
Retest of high-timeframe support
Retest of the trend line
Reaction from the local long reload zone
This confluence has sparked a clean reaction, and I’m targeting the high-timeframe range EQ as the next objective.
For those not already in the trade, the area around 2.04664 could act as a potential entry zone (marked on the chart as Possible Entry Zone).
If you’d like to see exactly how I built this setup, I’ll be posting a detailed breakdown on my YouTube channel, walking through the reasoning and step-by-step process behind the analysis.
GBP/JPY Trade Idea
Many fundamental analysts are calling for weakness in JPY pairs, but in this newsletter I’m focusing strictly on the technicals. I believe technical analysis, when applied properly, provides as much edge as fundamentals — though the strongest approach is often a fusion of the two.
With that in mind, I’m working on building a team of day traders, swing traders, and fundamental analysts to provide fusion-style market coverage across Forex, crypto, commodities, and indices. Readers of this newsletter will be the first to hear more about this upcoming project.
On the daily chart, GBP/JPY broke above the 200.50 level last week, but Friday’s candle closed as a clear bearish engulfing candle. This puts us in an interesting position: while the higher timeframes remain bullish, the short-term picture is showing signs of weakness.
Looking at the 4-hour chart, we can see a potential break-and-retest setup forming that could support a short trade. However, it’s important to recognize that this would be a mean reversion trade, since it goes against the broader bullish trend.
If you’re considering this setup, the key is to manage expectations and risk carefully. Shorting here isn’t a trend-following play, it’s an attempt to capitalize on a possible corrective move within an otherwise bullish structure.
Zooming into the 4-hour chart, GBP/JPY is currently trading within a range. The earlier breakout above the range highs also marked a breakout above higher-timeframe resistance. Now, however, price is showing a local bearish retest of the 199.70 area.
If this retest develops into a full range resolution, 199.70 becomes a potential area of interest for shorts. In this case:
Stop-loss placement should generally be above the range high.
Exact levels will depend on how conservative or aggressive you want to be, and I’ve marked a few different options on the chart.
Entry could come either from a retest of this area or directly at market, depending on where price is when you’re reading this.
For now, I haven’t entered this trade, but I’m monitoring GBP/JPY closely throughout the day and the week for potential setups. My first downside target would be the range low, though intraday traders or scalpers may prefer looking for a move to the range EQ near 199.00.
AUD/JPY Setup
AUD/JPY is showing a beautiful rounded retest of the daily breakout level around 97.30. This zone has been tested multiple times and continues to act as firm support, keeping the broader structure bullish as long as this area holds.
Shifting down to the 4-hour chart, we can see a descending bearish trend line overhead (marked in white). While the pair had been printing a sequence of lower lows, last week we saw the first higher low, suggesting a potential shift in momentum.
Taken together, price action is starting to resemble a descending triangle pattern. If we see a confirmed break above the trend line, I’d look for a continuation move targeting the local highs of this structure.
Final Note on Correlation
It’s important to recognize that all three trade ideas this week are correlated. Some are positively correlated, while others are negatively correlated. This means you need to be very deliberate with how you manage risk across them.
For example, going long GBP/AUD and short GBP/JPY puts you in positions that are likely to conflict, chances are, only one will play out. That’s not always the case, but it’s a scenario worth keeping in mind.
A simple way to manage this is by scaling your risk. If you normally risk 1% per trade, but decide to enter two correlated trades, you might instead risk 0.5% on each. That way, if one position is a winner and the other a loser, proper risk-to-reward should still leave you ahead.
Finally, remember that nothing in this newsletter is financial advice. The trade ideas I share here are intended for educational purposes only, to help you study the charts and strengthen your own analysis.
Thank you for reading this week’s edition of The Clarity Edge. I’ll see you in the next one. And don’t forget to check out the YouTube video coming out later today, where I’ll go deeper into these setups.