Like other yen crosses, the AUDJPY is in a period of consolidation. The pair is carving what appears to be a wedge pattern following the 850 pip decline that occurred between late January and March.
While it looks promising at the moment, it’s important to remember that more “touches” are needed. With only two points of contact on each side, it isn’t a very well defined structure, at least not yet.
However, I do think that a retest of resistance near 83.40/50 would trigger an influx of selling pressure. Likewise, a move to support near 81.40/50 would likely attract buyers.
Given the recent 850 pip selloff, this wedge may represent a continuation pattern. Either way, at 400 pips from top to bottom, a breakout in either direction could produce a favorable opportunity.
Keep in mind that if you trade end of day charts as I do, a “breakout” is a daily close (using New York close charts) above resistance or below support. It isn’t enough to see an intraday move beyond the level in question.
The current scenario I’m working with is that an upside break would target the 87.50 area while a downside break would expose 77.50. That’s using the 400 pip height of the pattern and measuring from a probable breakout point.
Of course, those are just best guesses. We won’t be able to define an actual target until the AUDJPY breaks free from consolidation.
That also assumes that this is indeed a wedge pattern. The way the pair reacts to support and resistance over the coming days and weeks will help us determine the answer to that.
For now, this is one for the watch list.