Trade Idea: AUD/JPY Symmetrical Triangle Breakout

We’ve been seeing a lot of moves from the yen pairs these days so I’ve decided to take this breakout setup on AUD/JPY. As you can see from the pair’s 1-hour chart below, price already broke below the support of the symmetrical triangle consolidation pattern, confirming that it’s ready to head further south.

AUD/JPY 1-hour Forex Chart

AUD/JPY 1-hour Forex Chart

Fundamentals support more losses for this pair, especially since the RBA cut interest rates earlier this month and data from China has been coming in weaker than expected. This hints at more weakness for the Australian economy, particularly for its mining and exports sectors, and perhaps a prolonged risk-off environment.

As for the Japanese yen, the currency got a strong boost when Finance Minister Aso agreed with the rest of the G7 leaders in saying that competitive devaluation of currencies should be avoided. This allows the lower-yielding yen to take advantage of risk aversion in the markets without traders being wary of central bank intervention or jawboning for the time being.

I’ve set a wide stop past the triangle resistance and 81.00 major psychological level to give me room to cut losses in case price suddenly swings higher. As for my profit target, I couldn’t find a nearby support area on the short-term time frames so I zoomed all the way out to the weekly chart.

AUD/JPY Weekly Forex Chart

AUD/JPY Weekly Forex Chart

From this time frame, it looks like the next major support is near the 74.00 handle so I’ll set my profit target around that area. I’ve also noted that the triangle pattern is around 300 pips in height so I’ll be ready to lock in some gains once price has moved lower by that amount.

Here’s my plan:

Short AUD/JPY at market (78.85), stop loss at 81.25, profit target at 74.25.

I’ve risked 0.5% of my account on this setup and I’m going for a 1.9-to-1 R:R. Don’t forget to read our risk disclosure if you’re taking the same trade!

Cheers,

Happy time

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  • Ken Hatton

    I would like to believe that you are correct but I have often seen these false breakouts turn around and go the other way. Here is what I see in store for the immediate future. Perhaps I am incorrect. We shall see.

    • Yikes. Looking at price action now, I keep thinking that I should’ve waited for a pullback to catch a better price. But fundamentals tells me that further AUD weakness could be in the cards…

  • slmsamee

    Hi Happy Pip, I’m wondering if this trade is still valid? I’ve been looking at the technicals (Pivots, Fib Extenstion/retracement, higher timeframe MA’s) and I’m aiming to get in a bit higher above 80. I’m not yet to confident in my ability to trade the fundamentals, but this current upside move if the trade is still valid will target 80.5 to 80.9ish?

    Also, If I’m seeing things correctly, we are in a descending Channel on the 1 week time frame with an upper channel currently around $85, but the lower channel closer to $74, but we could meet a bit of support around $76.5 – 76.9?

    • Nope, I closed this one early when the pair formed higher lows after that triangle downside breakout. I’m looking at a potential short entry on a higher pullback as well, but for now I’m also seeing a bit of a range between 78.50 to 80.50.

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