Trade Idea: 2012-10-3 4:08
Feast your eyes on this lovely setup!
Pretty nice, right?! USD/JPY is currently testing a major area of interest. Additionally, Stochastic shows that conditions are overbought. If resistance holds, we could see the pair return to its former lows at 77.15.
This is why I just sold the pair! Don’t worry! I’m well aware that catching tops and bottoms is difficult so I decided to split my position into two. I shorted half of my position at market, as I don’t want to get left behind in the event that the resistance area holds. Meanwhile, I’ve placed the remainder around the falling trend line, just in case the bulls still have some “oomph” left in them.
I know that Spain has been dictating price action for the past few days. However, I think that this week’s roster of top-tier U.S. data would move the spotlight back to the dollar, starting with the ADP employment and ISM non-manufacturing reports later and ultimately, the NFP report on Friday.
The Fed has gone all out in launching an open-ended QE3. But I’m pretty sure that I’m not the only one wondering how much farther the Fed could go in supporting the economy.
Worse-than-expected data from the U.S. would probably get the dollar sold-off as they could lead to speculations of more easing. On the other hand, positive figures could keep the currency afloat.
In any case, I will be on my toes for the reports. Should they come in better-than-expected and invalidate my trade idea, I will cut my losses early. But if they don’t I’ll surely be ready to catch the drop on USD/JPY!
Here’s what I plan to do:
Short USD/JPY at market (78.17) and at 78.75. SL: 79.25, PT 1: 77.15, PT2: to be determined, 0.5% risk on each position. (Risk disclosure.)
Please, please, please wish me luck!