The BoJ convenes momentarily for what is arguably the most anticipated meeting since April of 2013. For those who don’t know, when the BoJ meets, those with an interest in the yen pairs tend to listen up as the meetings have a history of rocking the boat.
While I never trade the news, I do look forward to event risk such as this as it tends to push certain currency pairs out of their comfort zone. One pair that fits that description exceptionally well is AUDJPY.
The yen cross has been consolidating within an ascending channel ever since the August 24th selloff that saw the pair lose 700 pips in a single day. Both support and resistance of the price structure have now been tested on two separate occasions, giving us a well-defined pattern to work with.
Will the upcoming BoJ decision be enough to trigger a break from this channel?
That is anyone’s guess. It would take quite the decision on the part of the BoJ to cause AUDJPY to plummet nearly 200 pips to the range floor. However one thing is extremely likely – that the meeting will shake things up, one way or the other.
A trade idea such as this is all about patience. Whether the pair breaks below channel support on the current leg lower is as irrelevant as it is unclear. It isn’t about knowing which direction it will move in the short-term, but rather making yourself ready and available if and when it does break lower.
Summary: Watch for a selling opportunity on a daily close below channel support. Below there, key support comes in at 82, 79.35 and 74.45. Only a daily close above channel resistance would negate the trade idea.
