Monday, August 25, 2008

USD/JPY -- looking for a short-term reversal

as I write, the USD/JPY pair is trading a few pips below 110. my momentum indicator turned negative at the end of last week. average daily volatility has declined to its lowest levels since last October. according to the Big Mac Index, the Nippy's 28% undervalued compared to the Dollar. plus, the pair has shown little determination to really push higher the last few weeks.

so I'm short (since 1130 last night) with a tight stop and a lot of leverage. I like the risk/reward offering.

I'm posting this not as a recommendation (by the time most of you read this, the trade will likely either be stopped out or closed for a good profit) but rather as an example of what I look for in a currency trade set-up. after it's over I'll post a slide show of the screen shots I took along the way. whether I win or lose the price analysis of this trade is worth examining.