Closed the hedge trade, short USDJPY at 96.20, -40 pips, -5.6%.
The pair has generated a long signal, although strictly speaking I should wait for this 4hr candle to finish at 1600 hrs before the signal is valid. If UJ remains above 96.00 by the end of this candle, the long signal is confirmed. Looking at the price action I think the risk of UJ dropping back below 96 in the next 2 hours is remote indeed.
If it moves higher as expected and goes above my long entry at 96.66, then the hedge has been successful. Instead of a 80 pip loss I only suffer a 40 pip loss.
Let’s hope we don’t get a nasty whipsaw here !
The system long signal validity threshold is closer to 95.92/95, not 96.05 as I wrote earlier. The pair has just retreated to 96.05 after the NY options cut, so there is some risk still!