Hours ago the AUDJPY tested the (new) resistance area at 88.60/80. We discussed the area over the weekend as one that could attract sellers following last Friday’s breakdown.
However, like much of the market, the pair is taking its time following through on the recent break. I have no doubt the summer months are partially responsible for the slowdown in activity.
But a closer look at the 4-hour chart shows a level that could offer an opportunity over the next few sessions.
The short-term trend line that extends from the July 18th low is under pressure for the third time. Given Friday’s break of trend line support, a close below this short-term level could set up a favorable selling opportunity.
If we do get a close below support near 87.90, I will need to see bearish price action or at least a rejection on a retest of the area as new resistance. The reason for this is because of the lower than usual volume right now which can lead to false breaks.
In case you’re wondering, I’m not considering this to be a head and shoulders pattern. The formation doesn’t warrant such a label, not to mention I don’t trade the head and shoulders on anything lower than the daily time frame.
A close below the support level near 87.90 would expose the July lows near 85.80. That will be my target, but again I won’t consider selling the AUDJPY without some form of a bearish rejection following a close below support.
Want to see how we are trading this setup? Click here to get lifetime access.
