Trade Idea: AUD/JPY Post-Election Downtrend

Aha! I spy with my one good eye this neat long-term downtrend on AUD/JPY and strong bearish confirmation from the U.S. election results. Check out my short play!

AUD/JPY Trade Idea

I’ve been keeping tabs on this AUD/JPY descending channel on the daily time frame for quite some time, but I’ve had doubts that the selloff could continue after that long period of consolidation above 76.00. Price even made an attempt to break past the channel resistance around the 82.00 handle, but it looks like risk-off vibes are making a hella strong comeback.

AUD/JPY Daily Forex Chart

AUD/JPY Daily Forex Chart

The U.S. election results are doing a number on the markets so far, as Trump’s lead is weighing heavily on global markets and higher-yielding currencies like the Aussie. Meanwhile, the lower-yielding Japanese yen is taking advantage of the flight to safety and the ongoing dollar dump.

I wasn’t able to catch the actual test of the channel resistance so I settled for a short position at market while bearish momentum was still in play. I was able to get in at 77.30 and I plan on adding on a break of the 76.00 support area while aiming for the next floor around the 70.00 mark. I’ve got my stop past the 82.00 handle or channel resistance.

I’m thinking that this risk-off environment could persist throughout the day, as European and U.S. traders have yet to wake up to this outcome. Futures are all in the red, suggesting that stock markets could open much lower later on. Here’s what I have:

Short AUD/JPY at 77.30, SL at 82.25, initial PT at 70.25. I’ve risked 0.5% of my account on this setup for a potential 1.41-to-1 R:R.

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.

Q3 2016 Trading Performance Review
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  • Nazeem

    Phew it turned a bit higher than your SL. Did you move SL at all? I got in at 82.329 and it`s at 80.93 (138 pips profit) now. I will have to get out before weekend as I find Yen sometimes have big weekend gaps. This could be a huge 1000+ pips trade, so if it continues to drop like a stone then I will have to add a trade on every retrace etc. I`m not really wanting to take revenge, but it seems I`m coming back from a bit of a draw down.

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