Forex Watchlist: AUD/JPY Symmetrical Triangle

Yen pairs look ready to break out of their consolidation patterns these days, and I’m favoring this AUD/JPY setup in case an upside move happens.

AUD/JPY Trade Setup

On the pair’s 4-hour time frame, it can be seen that price made higher lows and lower highs since mid-June. Price is moving close to the end of the symmetrical triangle pattern so I’m thinking that a breakout is bound to take place sooner or later.

To be honest, I’ve got a bullish bias on this pair, mostly based on diverging monetary policy biases between the RBA and the BOJ. If you recall, the RBA minutes printed last week indicated that the Australian central bank is no longer looking to cut rates soon while the BOJ monetary policy decision kept the door open for more aggressive stimulus.

AUD/JPY 4-hour Forex Chart

AUD/JPY 4-hour Forex Chart

Apart from that, the outcome of the OPEC meeting in Algiers could keep risk appetite in play, as the promise of an output deal could keep crude oil and other commodities supported. Earlier today, Japan printed a downbeat retail sales report, which showed a 2.1% year-over-year slump versus the projected 1.7% decline for August.

I haven’t set any actual orders yet, though, since I plan on waiting for a convincing breakout and maybe a quick pullback before hopping in. I’m eyeing an entry around the 78.00 levels for a long position or a move below the 76.50 mark for a short trade.

This triangle formation is approximately 700 pips tall so I’ll be aiming for roughly the same amount as my target and I’ll set my stops at the opposite side of the triangle to give myself room to cut my position in case the break proves to be a fake out. Which direction do you think this pair might go?

As always, 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 simply follow what I do.

Risk Disclosure
Pipcrawler’s Q2 2016 Blog Trading Performance