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AUDJPY: Can the Safe Haven Yen Do It Again?

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The AUDJPY was in rally mode overnight, spiking above former trend line support for the fifth straight session. This is a level I mentioned on May 26th where a breakdown seemed imminent given the “heavy” price action in the weeks prior.

Although the pair is still trading above the trend line at the time of this writing, it doesn’t mean the May 31st breakdown was false. As I’ve stated in the past, the daily close (5 pm EST) is the only thing that matters here.

Everything else is just noise. Look no further than the lower wick on May 18th and again on May 30th. These are telltale signs that any price action that occurs below the daily time frame with regard to this trend line is not to be trusted.

As I’m sure you’re aware, we have a key Fed rate decision and statement today at 2 pm EST. And any notion of it being a dull affair just went out the window with the latest miss from both CPI and retail sales.

Those misses are what triggered the surge in the yen just hours ago. So the question we have to ask ourselves concerning the AUDJPY is, will the safe haven bid trigger a daily close back below the trend line near 83.20.

If it does, the short game is still viable. If on the other hand, the pair closes well above 83.20, all bets are off, and we could then label the May 31st breakdown as a false move. But it’s best to hold judgment until the session closes.

Note that the Australian dollar is perhaps the worst currency to short against the yen at the moment. In other words, it’s stronger than others such as the Euro, pound sterling and of course the US dollar.

So why am I still interested? Two reasons come to mind.

  1. I like the level involved
  2. The amount of open space to the downside is attractive

Also, apart from the NZDJPY, the AUDJPY has yet to experience a significant drop in the last couple of months. In other words, it’s trading at a premium, unlike some others which are becoming a bit overextended to the downside.

All of this rests on where the pair closes at the end of today’s session at 5 pm EST. A close above the 83.20 area would set our sights higher while a close below it would keep the bearish scenario alive.

I was stopped out of my first AUDJPY short for just better than breakeven. However, I’ve reentered at 83.53 with a relatively tight stop. The idea was shared with members when the pair was trading at 83.42.

A daily close below 83.20 would expose downside targets including 82.60, 81.50/80 and 80.30.

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AUDJPY trend line

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3 comments
Al says

If it closes below 83.00, I’d be tempted to jump in ahead of tomorrow’s AUD employment change (4.5 hours later) and Friday’s JPY rate decision, but I think I should wait until next week.

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Sandi says

I did trade the Aud/Jpy under the 83.00 you suggested and I ended up; losing the trade. I did get in a little late at 82.75. It had closed at below the 83.00, so I figured, I could make it to 82.60. It seems I always pick the wrong choice to trade from your picks.. I got out at 82.87. I didn’t lose a lot, but I have a small account, so can’t afford to lose too much. I have been following you for a little while, but have only taken 2 of your trades. I see most of your trades do seem to work out, I just get in the wrong ones.

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Ramesh says

It is wise to wait for confirmation and it this case the confirmation with be the close below the daily close of the 83.20 level. Though i followed this pair since you posted this Justin, i was also aware of aud strength verses the usd and i notice that most aud crosses correlate. Anyway thanks for sharing, what is your take now that the market is currently above 84.00?

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