FX.co ★ The USD/JPY technical analysis and trading recommendations for October 12, 2010

4-hour timeframe

Overview:
The sell signal is continuing, the Bollinger bands are diverging, thus indicating the downside movement. This signal is confirmed and strong as the price is below the Ishimoku cloud and the Chinkou Span is below the price chart. In addition, it should be mentioned that presently the price is below the pivot level and this situation offers us the target to 81.10 – the first resistance level. In case this level is passed the next target for downside movement will be 80.28 – the second resistance level. If the price does not breach this level, the correctional upward movement can start. If the price is above the Kijun-Sen (82.30) that will denote the weakening of the current sell signal and the point to reduce short positions. The Chinkou Span is below the price chart, which is a confirmation of the bearish sentiment. The Bollinger Bands show the downside movement, the lines are directed down, thus signaling the downtrend and probable correction. The MACD is slightly ascending thus pointing to the current correction.

Trading recommendations:
Currently, it is recommended to wait for the end of the correction and then to trade short with the target to 81.10. Stop-loss is set above 82.30.

In addition to technical image one should take into account the fundamental data and the time of their release.

The chart annotation:
Ishimoku indicator:
Tenkan-sen — red line
Kijun-Sen — blue line
Senkou Span A — light brown stipple line
Senkou Span B — light purple stipple line
Chinkou Span — green line
Bollinger Bands indicator:
3 yellow lines
MACD indicator:
The red line and the histogram with the white bars in the indicators window.