Forex Trade Idea: AUD/JPY Short

To celebrate Leap Day, I’m going with my usual forex trend retracement setup that I see happening on AUD/JPY.  Will strong resistance continue to hold?

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AUD/JPY 4-Hour Forex Chart

AUD/JPY 4-Hour Forex Chart

On the four hour chart of AUD/JPY above, we can see the pair has been in a downtrend since the end of 2015.  The pair has bounced after making lows just above the 77.00 handle, and it seems to have found a ton of resistance around the 50% Fibonacci retracement area all through February.  I’m going to keep it simple by playing the Fib level for a short position, especially as it lines up with the falling 200 simple moving averages.  Also, there may be some resistance up around the 61% Fib level and the falling trendline.

Now, this week ahead is economic data heavy, especially for the Australian dollar, which is why I am focusing on this pair to start the week.  The most notable event is the upcoming Reserve Bank of Australia monetary policy decision, and because of the central bank event, I’m going to be super conservative with my entry order and position size.  I’m only going with one small half position on an even higher pullback, setting a wide stop (weekly ATR), and because volatility could pick up quickly, I’m setting a wide target at previous major support that held between 2011 to 2012. Here’s what I’m doing:

Short half position AUD/JPY at 82.00, max stop at 85.25, max target at 76.00

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 1.84:1. 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 by following me on Twitter and Facebook!