The AUDJPY has been in rally mode since early June gaining 750 pips since that time. However, buyers have struggled in the last couple of weeks to breach the 89.30 handle. The level played a critical role between February and July of 2015.
Last week produced something of a bearish pattern, but the lower wick was too large to call it a pin bar. Still, the July 21st selloff doesn’t bode well for AUDJPY bulls.
If we jump down to the 4-hour chart, it seems we have a broadening wedge developing. The pair is currently pressuring support for the third time since it began forming in late June.
As long as prices remain within this pattern on a 4-hour closing basis, there isn’t much to do here. However, a close below support near 88.50 would expose the two July swing lows near 87.60. A close below that would pave the way for a move toward the July low near 85.80.
Due to how choppy the markets have been over the last two months, I may even require a daily close below trend line support before considering a position. As always, it depends on how the price action looks if and when the level breaks.
I also won’t be playing a break today as I don’t want to take on exposure before the weekend. We’ll see how this plays out next week.
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