On the first of July I mentioned the AUDJPY bearish pin bar that had formed after filling the weekend gap. Since that time the pair has plummeted more than 280 pips.
While a 280 pip gain is nothing to scoff at, it doesn’t quite fill the potential of what could be a much larger correction for AUDJPY. In fact on a medium to long-term basis I believe this move may just be getting started.
Why do I think so, you ask?
The bearish pin bar on July 1st gave us a great opportunity to go short and was indeed profitable. However the price action that occurred the following week was much more impressive.
The weekly chart tells the story.
The most important factor moving forward is that former channel support, now resistance, remains intact on a daily close basis. In other words, if the daily time frame closes back above the former support level, any bearish setup should be dismissed as higher prices are likely.
To get a true sense of where a favorable entry may occur we can move down to a lower time frame. The one hour chart gives us a great look at what appears to be a rising wedge pattern within a broader downtrend.
Note: I am only interested in a break lower given the prevailing trend.
Summary: Wait for a close below wedge support and then watch for an opportunity to sell. Key support comes in at 90.20, 89.35 and 88.50 with a longer-term objective near 86.40. Alternatively, a break higher would negate any bearish bias and leave us waiting for a better opportunity to sell.
