On Sunday I wrote about a potential short opportunity on AUDJPY.
The pair reached a key resistance area last week at 78.70. It’s a region that served as support in September and October of last year.
AUDJPY encountered selling pressure here last Thursday and again on Friday.
However, it wasn’t quite enough for me to open a short position.
That said, there may be another way to play a weakening AUDJPY.
I don’t usually drop down to the 4-hour chart. In most cases, the daily time frame is all I need.
But this is one instance where the intraday time frame can shed some light on what’s happening with AUDJPY.
Notice how the pair has started to carve a narrow ascending channel on the 4-hour time frame below.
This pattern may be what’s needed to signal a turning point.
As long as the pair is trading between support and resistance, the relief rally that began January 3rd is intact.
Alternatively, a close below support could signal the continuation of the larger selloff that commenced last month.
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The only words of caution I have to offer is the V-shaped bottom that formed earlier this month.
That’s often a sign of a short-term bottom. We saw similar patterns form on other yen pairs following the January 3rd flash crash.
However, it’s also important to keep the bigger picture in mind.
AUDJPY has been trending lower since September of 2017. Even the rally last month that took the pair to 83.80 didn’t break the longer term downtrend.
For now, though, it’s going to take a 4-hour close below channel support for sellers to regain control.
Until that happens, AUDJPY may continue to strengthen in the near term.
A break below support would expose 76.00 followed by the 73.30 area.