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Over the weekend I discussed how the AUDJPY would likely move lower this week. The weakness across several yen pairs into Friday’s close suggested a continuation this week.
Here is what I wrote on Sunday:
I like the idea of pitting these two currencies together (Australian dollar and Japanese yen) should the yen catch a safe haven bid over the coming days and weeks.
From a technical perspective, 87.20 is significant, but the confluence of support at 85.40 holds the key to much lower levels in my opinion. If we see the pair test 85.40 and buyers fail to hold prices above it, a 400 pip slide toward 81.50 may be in the cards.
It turns out we did get a safe haven bid on Monday and even into Tuesday. So much so that the AUDJPY not only broke below 87.20, but it also tagged the confluence of support at 85.40.
Now, some traders may see today’s bounce as a buying opportunity. The long lower wick that’s formed on the daily chart thus far supports that notion.
However, I don’t see it that way. The yen crosses remain under pressure this week, and Monday’s violent selloff in the AUDJPY doesn’t bode well for those trying to buy at current levels.
Instead of buying prices above 85.40, I’m only interested in shorting a daily close (New York 5 pm EST) below it. And if we do get a retest of 87.20 as new resistance, I’ll view it as a potential selling opportunity.
My target on a daily close below 85.40 is the 2017 low at 81.50. That said, I would expect to see an influx of buying pressure near 83.80 and even 84.40 to some degree on the way down.
But first we need a daily close below 85.40. Until that happens there isn’t much to do here in my opinion.
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