AUDJPY has been a roller coaster ride for several years now. But what may look like random price action is, in fact, a collection of technical patterns.
We’ll start with the large descending channel that extends from the 2014 high, a structure that has directed the pair lower since its inception almost two years ago.
In the middle of this seventeen-month pattern, we have the former support level of an even larger ascending channel. The formation you see in the chart below eventually gave way to the aggressive 1,000-pip decline between July and August of last year.
With the big picture set, we can dive into what’s happening on the daily chart to get a sense of where the pair might trade in the near-term.
Although sellers came out in force at a familiar level in late March, the bulls have managed to climb right back to the 86.40 handle. The higher low in April and consecutive retests of 86.40 are relatively bullish, or at least a sign to stay clear of shorts at the moment.
But there is an event this week that could finally push the pair out of its comfort zone.
On Thursday at 1 am EST, the BoJ is set to convene for their quarterly outlook report followed by a press conference, which occurs eight times each year. This one-two punch typically rattles markets, especially if traders interpret the rhetoric as overly hawkish or dovish.
However, I’m not so interested in the technicalities of the event itself, but rather how markets respond to it. And with AUDJPY trading just below a confluence of resistance, a reaction in either direction could give us clues as to the future path of the yen cross.
I’ll stand aside for now and wait for favorable price action to set up following Thursday’s event. A close above 86.40 would open the door for a move to the 88.30 resistance level while a failure at 86.40 would re-expose the 83.40 handle.