On Friday, I mentioned the confluence of resistance that has rejected recent advances by AUDJPY. The channel resistance in question dates back to November of 2014 and intersects with the key 86.40 horizontal level.
While it may be tempting to speculate about a bullish break of this area, it has to be respected as resistance so long as the pair trades below it on a daily closing basis. In other words, it’s trading within the upper limits of a descending channel until it isn’t.
So far this week the yen cross has given up 60 pips from Friday’s close. But that doesn’t mean a lot considering where it’s currently trading along with the upcoming event risk for the Australian dollar. More on this later.
If we move down to the 4-hour chart, we can see that the pair has just run into a potentially strong area of support. In any other circumstance, this would have us watching for a buying opportunity. However, the seventeen-month resistance level near 86.40 prevents this idea from becoming actionable.
Instead, I prefer to use the area near 84.90 as a way to identify what could become a favorable selling opportunity. But like all of the technical formations we trade, a close below the level is required before further consideration can be justified.
The next 24 hours should be extremely telling for AUDJPY and every other Aussie pair. The upcoming trade balance at 9:30 pm EST will be influential, but the real catalyst doesn’t come until the RBA rate statement at 12:30 am EST.
With this in mind, I won’t be making any moves here until the dust settles and we have a clear indication of where the Australian dollar wants to go.