I don’t always see technical setups as good as this, but when I do, I take it!
From a technical standpoint, this setup on the 4-hour chart could not be more attractive:
1. USD/JPY is back at the 102.70 area, which was a solid resistance level back in February and is near the 38.2% and 50% Fib retracement levels.
2. The pair is retesting a broken rising trend line.
3. Stochastic is currently on the oversold territory.
4. My 100 and 200 SMAs have just crossed and hinted at an uptrend. The last two SMA crosses on the 4-hour charts have been accurate at hinting new trends.
The fundamental side is a bit trickier. USD/JPY is having trouble making new yearly highs even though the Fed has hinted that it will continue to taper at its current pace and the BOJ has said that it will continue to expand the monetary base by 60-70 trillion JPY a year. Concerns over Ukraine‘s political scene and China’s growth have also weighed on the yen crosses and limited USD/JPY’s gains.
This is why I didn’t risk my usual 0.50% on my trade. I only risked 0.25% at 102.70 and placed a 100-pip stop. I figured my trade idea would be invalidated if price fell below the rising trend line (at 102.70), the SMA crossover (102.20-ish), and the 102.00 major psychological handle.
I will also pay closer attention to news reports more than what I’m doing with my GBP/USD trade. After all, the RBNZ’s rate decision, Australia’s jobs numbers, and China’s industrial production could hurt my trade if they inspire more risk aversion. The U.S. retail sales could also cause USD selling if it misses market expectations.
Right now I’m planning to be around these major releases and adjust my position accordingly. I’ll probably add the remaining 0.25% risk if price goes back above 103.00 or close early if the major reports I pointed out go against my trade.
What do you think of this setup? Got any tips? 🙂