The AUDJPY, like other yen crosses, has been consolidating for several weeks.
We have also seen a short-term uptrend develop since the August 2019 low.
This upward movement is overshadowed by a downtrend that has been in place since early 2018.
That means the ascending channel below may outline a continuation pattern.
It wouldn’t be the first time the AUDJPY has done this.
A similar ascending channel developed between January and April of last year, albeit at a lesser angle.
Although we didn’t trade this breakdown as a channel, we did catch the 200+ pip move that began with the May 7th retest above.
So will the current channel below play out like the first one above?
That’s the big question right now.
Of course, we won’t know the answer until we see how AUDJPY reacts to channel support, and also what occurs following a breakdown.
One thing I can tell you is that ascending channels like this tend to break lower, not higher.
That’s especially true given the longer-term downtrend here.
If it does play out like the channel that materialized in 2019, it would suggest an eventual selloff of 400 pips, maybe more.
Even the distance between channel support and the pattern’s inception point of 71.70 is approximately 250 pips.
So either way, the AUDJPY is one to watch.
A daily close below channel support just above 74.00 would expose 73.40, followed by 72.50 and perhaps 71.70.
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