Cross-Eyeing: Falling Trend Line on AUD/JPY – Trade Closed

Trade Closed: 2011-10-06 23:55

AUD/JPY 1-hour chart

Traders were just too risk-hungry yesterday, gobbling up higher-yielding assets like bunny ears! For the third day in a row, equities and commodities rose, which benefited the Australian dollar.

Unfortunately for me, this caused AUD/JPY to break its falling trend line, as the pair zoomed all the way up to the 75.00 handle!

I actually thought I got a good entry spot, as we saw some reversal candles form just below the 50.0% Fibonacci level. As it turns out, the bulls were just taking a breather, as the 74.00 mark failed to hold. It actually looks like a solid support area now.

Stopped out at 74.70: -70 pips/ -1.0%

A little disappointed but I can’t stay in the dumps for too long. This break of the trend line may signal that AUD/JPY is back on the rise, so I may consider buying this pair up in the coming weeks. I just have to do a good job in recognizing current market sentiment and gauging whether its risk on or risk off!

On a non-trading note, I do hope the NBA owners and players get their act together and come up with a solid deal by Monday. I don’t wanna miss any games!

That’s all for now folks! Thanks for following my blog and hope y’all enjoy the weekend!

Trade Idea: 2011-10-05 3:15

AUD/JPY 1-hour chart

Fundamentally, I don’t see the Australian dollar coming under a lot of buying pressure over the next few days. The RBA sounded very dovish in its rate statement yesterday, and I think that will be enough to snuff out demand for the Aussie, even though this week’s reports have been better than expected.

In the long run, I believe traders will put more weight on the central bank’s monetary policy decisions than these individual reports. After all, the RBA appears to have opened the door to easing monetary policy. I smell an interest rate cut in the making, brothers, and we all know that could lead to further Aussie weakness!

Furthermore, I think that markets will revert back to a RISK OFF environment soon, which will help boost the yen against its counterparts.

As for technicals, take a look at my checklist below!

Long-term falling trend line – check!
50% Fibonacci retracement level – check!
Major psychological level – check!
Former support area – check!

If that setup doesn’t convince you to short, I don’t know what will! Basically, I’m betting that the falling trend line that began in early September will stay intact. The area of 74.00 seems like a prime spot for a bounce because it lines up perfectly with the 50% Fib level. The best thing about it is that I already know that price is no stranger to bouncing off the 74.00 MaPs!

So here’s how I plan to play my cards:

Sell at 74.00, stop loss at 74.70, profit target at 72.30.

I set my stop loss above the 61.8% Fib because if price ever reaches that area, it would entail a break of the long-term trend line. Although my profit target is set in the area of the previous low at 72.30, I will consider exiting early if market conditions call for it. After all, there’s a lot of space between my entry point and profit target!

So what do y’all think of this trade idea? Anyone willing to join me?


  • Jonathan Baldie

    I think on this trade you should have checked the longer-term charts in great detail.

  • nb

    aud run might be over near 98s imo

  • nb

    hmm i don’t think its going as high as the 50% retracement..it just bounced the 38 and heading down

    • cyclopip

      We’ve finally been triggered! But right now, price is just hanging above
      74.00. It’s at 74.03 as I write this. Hopefully, bearishness kicks in
      soon!

  • Ossy

    my question is ….what if it breaks the 50% retracement what do you do then?

    • cyclopip

      If it breaks the 50% retracement, that would imply a break of the long-term trend line. That being the case, I would take that as a signal to exit, which is why I set my stop at 74.70.

      From there, I MAY consider going long, as it could be the start of a major trend reversal.

      • Mike

        unfortunately I just got stopped out

  • Amal Nafi

    What you think will happen till thursday? long? I used to trade gold in sunbirdfx ..

  • Ossy

    on the AUD/JPY…i noticed a MACD divergence on the 1 hour chart from the railway line candle formation just above the 61.8 pp on the fib…dont you think it might cause some minor reversal back to the 50pp??…what is going to be your reaction?

  • ケーちゃん

    Maybe 74.70 IS the resistance. I shorted from 74.10 once I spot a bearish divergence.

  • nb

    ah thats cool, but the aud was a surging bull this week up about 4 cents from the low