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?
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
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!