FX.co ★ The USD/JPY technical analysis and trading recommendations for October 18, 2010

4-hour timeframe

Overview:
The sell signal is observed, the Bollinger Bands diverge, thus indicating the downside movement. The sell signal is strong and confirmed, as the price is below the Ishimoku Cloud and the Chinkou Span is below the price curve. It is worth to mention that presently the price is below the pivot level; in this case, the first support level of 80.60 is the target for movement. In case this level is passed the next target for the downside movement will be 80.01 – the second support level. If the price fixates above the Kijun-Sen (81.50), this will indicate the weakening of the sell signal and point to reduce short positions. The Chinkou Span is below the price curve, thus indicating the bearish sentiment. The Bollinger Bands show the downwards tendency, the lines are diverging and directed down. The MACD is ascending, testifying about the current correction.

Trading recommendations:
Currently, it is recommended to trade short with the target to 80.60 and further to 80.01. Stop-loss is set above 81.50.

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.