My initial impressions on news that Obama and the Senate have agreed to a framework on the debt ceiling are here: http://ashraflaidi.com/forex-news/
As a trader, I want to use the positive sentiment that has built up here to sell USD/JPY. The pair is trading at 79.21 and that will be my entry point. The initial target is 78.50 and unless the newsflow starts to change, I will be selling there. My stop is at 79.56, which is a bit tighter than I like but on an event-driven trade, it’s probably prudent.
Here’s my reasoning. Every story I’ve read late on Tuesday sounds like an agreement is just a matter of hammering out some details and drafting a bill. That is NEVER the case in US politics. The moment some kind of consensus builds, every power-hungry politician will look to insert his/her input. I think it will only take a minor hiccup to send USD/JPY to the initial target. What’s especially instructive is that despite the incredible volume of good news and risk appetite today, USD/JPY was only able to climb 15 pips. Sellers in control of this pair and I’m selling with them.