Forex Trade Idea: AUD/JPY Short

AUD/JPY has pulled back higher to hit an area of previous interest and resistance. Is it time for forex sellers to hop back in recent weakness?

AUD/JPY 1-Hour Forex Chart

AUD/JPY 1-Hour Forex Chart

From the one hour forex chart above, we can see that the pair bounced from 82.00 area lows to hit the 84.00 – 85.00 area of previous interest/resistance. With the pair in a recent downtrend, I think there’s a good chance other traders are looking at it as an opportunity to hope in weakness and to play China’s growth issues (and likely its global economic effects).  I think that driving theme remains intact despite China’s efforts to calm its financial markets, which is why I kinda like a long Japanese yen position for the short-term.  And my catalyst for a new down move is the upcoming Australian jobs data; given their strong trade ties with China, it’s a good possibility Australia is feeling the pain, especially with commodity prices falling lately.

With the pair already stalling just under the 200 SMA, I’ve decided to hop in now for a small swing trade.  My stop is a pretty wide one of about a third of the weekly ATR, and my target is the recent swing lows.  Here’s what I’m doing:

Short half position AUD/JPY at 84.15, max stop at 85.70, max profit target at 82.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.38:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!