I’m on the hunt for a swing trade and I’m liking this potential reversal setup I spotted on AUD/JPY!
On its weekly time frame, the pair has made a nice doji candlestick formation. According to my handy dandy Candlesticks Cheat Sheet, this suggests that a reversal from the previous trend is in the cards. As luck would have it, the next candle is currently in the green and might just confirm the reversal signal!
On top of that, there’s a bullish divergence that just formed, with price making higher lows and stochastic forming lower lows. Once stochastic starts moving up, this could mean that the uptrend is starting to gain momentum and that I should be jumping in. It also helps that the pair has bounced off a Fib, which is within the vicinity of a former resistance level.
As for fundamentals, it appears that the yen isn’t gettin’ any lovin’ from traders recently, as plenty of headwinds are present in the Japanese economy. After all, Abe’s decision to increase taxes would take its toll on consumer spending and businesses, which could then be a drag on growth.
On the other hand, things are starting to look better for the Australian dollar, as the recently released Westpac consumer confidence figure printed an impressive 3.5% jump for August. Aside from that, optimism for China has been renewed lately when their trade balance data showed a strong improvement in exports.
Overall, I think this pair has good upside potential as commodities are looking pretty tough these days. And of course, how can I say no to the sweet positive carry that this long trade offers?
I’m thinking of buying at the 89.00 major psychological level then setting a wide stop of 300 pips since this is a weekly chart. If the rally has legs, I’m going to aim for the recent highs near 105.00.
What do you think? Will I be able to bounce back on my feet and end the quarter on a positive note with this trade? Don’t forget to read the risk disclosure if you’re planning on trading this pair too!
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