Mr. Rikio Shima — FX Trading Report: GBP/JPY aiming to break above 140.00 from 133.60

I recently had the opportunity to hear Mr. Rikio Shima say that the current pound-yen is a straightforward market.

From following Mr. Rikio Shima's article in Investment Salon on Saturday, October 5, I found that he was accurately catching the upward trend, which was very intriguing.

I will present Mr. Rikio Shima's FX trades over time.

As of October 5, Mr. Shima mentioned buying back pounds/yen (rising).

①2019/10/05 5:04:00

Regarding Brexit, the EU side had rejected the UK's proposal, but Prime Minister Johnson reiterated, “There will be no extension—either a new agreement or a no-deal Brexit.” The UK's situation is chaotic. If an agreement cannot be reached with the EU Parliament by the 19th, Prime Minister Johnson will have to request an extension.
If an extension occurs, the pound is likely to rebound.

However, after the Johnson-Merkel talks ended unsuccessfully, I took a small-position stance and entered a GBPJPY short.

②2019/10/08 20:12:00

I will also short GBPJPY by a small amount (the Johnson-Merkel talks also ended quite poorly).

GBPJPY −0.2 @ 130.55 (stop above 132.50)

I recognize that the direction was wrong and began looking for ways to cut the position losses.

③2019/10/09 23:55:00

Brexit remains volatile. I think the remark by Prime Minister Johnson yesterday that “Brexit under the withdrawal agreement is essentially impossible” is important. If Brexit cannot occur with a legally binding agreement, the conclusion would be that only a no-deal Brexit remains.
We are awaiting the basic outcome, but the market's overall reaction has been positive, and risk-off hasn't progressed as much as expected. Large hedge funds, etc., seem to be waiting to see whether tariffs will be raised on October 15, and plan to wait until then.
The position hasn't changed, but a small additional USDJPY and GBPJPY short have been a little sticky. I hope to unwind when opportunities arise.

I am deciding to close the GBPJPY stop-loss.

④2019/10/10 23:35:00

Regarding GBPJPY, the meeting between Prime Minister Johnson and Irish Prime Minister Varadkar has just finished.Reports say, “There is a path toward an agreement in sight.”I will also place a stop on GBPJPY.GBPJPY −0.2 @130.55 ⇒ Close @132.35
Reports say, “There is a path toward an agreement in sight.”
I will also place a stop on GBPJPY.

GBPJPY −0.2 @130.55 ⇒ Close @132.35

When it rose to 133.60, I decided to ride the trend in a following-mavor and entered a long.

⑤2019/10/11 1:30:00

Position Update (2)
The Johnson-Varadkar talks appear to have been quite good, and Ireland’s prime minister says a Brexit with an agreement may be possible by the end of the month. Considering Ireland was the toughest negotiating counterpart, Brexit becoming a reality seems reasonably likely.

At a fairly high level, I will go long on GBPJPY.
GBPJPY +1.3 @133.60 (stop at 132.00)

As of 3:00 AM on Oct 11, GBPJPY has already been expected to test 140, and unrealized profits have continued to accumulate.

⑥2019/10/11 3:12:00

GBPJPY aiming for over 140 yenUK Prime Minister Boris Johnson and Irish PM Varadkar's talks apparently went very well, and there is consensus that a path to a withdrawal agreement by the end of the month is visible.The most difficult Brexit issue was Varadkar. Because of the border with Northern Ireland, easy compromises are not possible. While it's not yet clear how the border issue will be resolved, since he believes a withdrawal agreement is possible, we can say we are reasonably close to the goal.If withdrawal can be achieved with an agreement, the pound is undervalued and has been left that way; with a global chorus of shorts, the pound would rise sharply. 140 yen may become just a waypoint. All a trader can do is maintain a slightly larger long position.Position remains unchanged.GBPJPY +1.3 @133.60 (stop at 132.00)
UK Prime Minister Boris Johnson and Irish PM Varadkar's talks apparently went very well, and there is consensus that a path to a withdrawal agreement by the end of the month is visible.

The most difficult Brexit issue was Varadkar. Because of the border with Northern Ireland, easy compromises are not possible. While it's not yet clear how the border issue will be resolved, since he believes a withdrawal agreement is possible, we can say we are reasonably close to the goal.
If withdrawal can be achieved with an agreement, the pound is undervalued and has been left that way; with a global chorus of shorts, the pound would rise sharply. 140 yen may become just a waypoint. All a trader can do is maintain a slightly larger long position.

Position remains unchanged.
GBPJPY +1.3 @133.60 (stop at 132.00)

I'm comfortably riding the trend and continuing to increase profits.

⑦2019/10/11 20:02:00

EU's Tusk also turning optimistic about Brexit in Britain
EU's President Tusk also seems optimistic that Britain can leave the EU on October 31.
Tusk says He has optimistic messages that a deal with the UK can be done.

However, at the entrance to London, while President Tusk was commenting, a minor wording cue (like “Johnson must present a proposal today” or “time is running out”) misled the AI that had pushed GBPJPY up to near 135, causing it to crash to nearly 134. Some may have been unnerved. An AI with poor comprehension is truly troublesome.

The EU summit will be held on Oct 17-18. Whether Johnson's plan is adopted and Brexit proceeds from the 31st depends on that. It seems a bit tight time-wise. Nevertheless, Johnson's plan is quite strong, and with this plan, Brexit negotiations will continue to move forward. In particular, Ireland and Northern Ireland's DUP, the hard-Brexit faction within the UK (ERG), and these groups all support Johnson's plan. France may say something odd, but as long as Ireland is OK, the EU summit will follow that course.

The possibility of a no-deal Brexit has become almost zero.

What remains is how far the pound will rebound. I think it will exceed 140 yen for now, but the target is not clear. Brexit, whether with or without an agreement, is challenging for the UK economy, but the pound is so undervalued that a level correction will proceed.

Currently, with GBPJPY, I am considering lowering the USDJPY side before 3:45 and reallocating into a GBPUSD position. Right now there is expectation of US-China agreement, so USDJPY should stay firm as well.

Isn’t this the essence of Mr. Shima Rikio’s trading based on fundamentals (of course he also examines every imaginable technical aspect)?

This was a symbolic moment where a trader can greatly extend profits when opportunities arise.

Report by Hayakawa