Day 4: our USD/JPY trade

I looked at selling USD/JPY at 97.50 and the fact that the pair rallied to 97.64 means my idea has been filled.

At the time of writing, USD/JPY is trading at 97.36. We have seen the daily stochastics move out of major oversold levels, however price action is starting to look more positive and this concerns me a touch.

One thing I am looking at is the five and ten-day moving averages, with a crossover of the five- and ten-day averages providing me with a signal to exit the trade and return to a more neutral stance. The daily MACD is still below zero, however I am keen to exit the trade if we see crossover in the very short-term moving averages, which should suggest the downtrend has run out of steam. On the whole my conviction behind further falls is low, with downside momentum losing traction.

On the hourly chart the pair has seen solid supply coming in at 97.50 and this is the key level in the short term. The downtrend drawn from the September high intersects at 97.80 and this could also be key. My proposed stop has been pulled down to 97.90, therefore mitigating much of the risk in case the pair starts to rally.

The US debt situation is not really getting any better, although there are some positive signs bubbling away in the background. At 05:00 AEST US Treasury Secretary Jack Lew is due to speak and once again he should detail that the US is due to start running out of funds by October 17. This is actually quite a loose deadline, because the US treasury will still receive revenue from different taxes. However, Mr Lew's comments will still be very interesting and could spur life into the USD.

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