Daily Price Action

AUDJPY Short-Term Pattern Emerges Amid Larger Downtrend


AUDJPY continues to trade within a 500 pip ascending channel that extends off of the September low at 82.10. I mentioned this pattern over the weekend along with the idea that the December 8th break below trend line support could trigger further selling pressure.

And although yesterday’s momentous Fed decision to hike rates for the first time in nearly a decade seemed to reinvigorate the bulls, it may only serve as a temporary relief from additional downside pressure.

Here is the three-month ascending channel along with a much larger descending channel that extends off of the 2014 high at 102.83.

AUDJPY weekly channels

Notice how descending channel support lines up with several lows between 2010 and 2012 at the 74.50 handle. This level also happens to be the 61.8 Fibonacci retracement from the 2008 low at 55 to the 2013 high at 105.42.

Following the weekend commentary, I had a lot of traders asking me what I thought of entering short prior to AUDJPY breaking below the ascending channel floor. While I personally entered short last week on the retest of former support as new resistance, there may be yet another opportunity if we look at the intraday charts.

The 1-hour chart below shows a rising wedge that recently broke down, which could offer a favorable opportunity to get short. Of course those who stick to the 4-hour charts and higher can wait for a 4-hour close below the level to add further conviction to the trade idea.

Keep in mind that without a retest of former support as new resistance, it will be hard to secure a favorable risk to reward ratio. Therefore, if the pair is unable to make it back to the 88 area over the coming sessions, it may be prudent to simply wait for a daily close below channel support near 85.70 before considering an entry.

My bearish bias will remain intact so long as AUDJPY trades below the three-month channel resistance on a closing basis. Key support can be found at Monday’s low at 86.50 along with the larger channel support near 85.80. A break below that would target 82, 80 and possibly 74.50 over the coming weeks and months.

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AUDJPY break of rising wedge on the 1-hour chart

Leave a Comment:

Shaon says

Great view Justin.

    Justin Bennett says

    Shaon, thanks, glad you enjoyed it.

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