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.
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.
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!
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