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With trade tensions back in full swing, I’m hoping to catch a short Aussie position with this quick correction opportunity on AUD/JPY. Think it’ll reach my entry area?

Short AUD/JPY Idea

This pair is forming a descending channel on its 1-hour chart and is currently bouncing off support. A short-term pullback may be in order, so I’m gonna keep my eyes peeled for a chance to hop in.

Using the Fib tool on the latest swing high and low reveals that the 61.8% level lines up with the channel resistance around the 76.50 minor psychological handle. This also coincides with a former support area that might now hold as a ceiling.

Stochastic is just starting to pull up from the oversold region and has plenty of room to climb before reaching the overbought territory. This suggests that buyers might stay in the game for a bit longer before sellers take over again.

AUD/JPY 1-hour Forex Chart
AUD/JPY 1-hour Forex Chart

The Land Down Under still has its jobs report up for release this week, and analysts are expecting to see a 15.2K increase in hiring that might keep the jobless rate steady at 5.0%.

Another report worth watching is the quarterly wage price index, which might advance from 0.5% to 0.6% to signal a bit more upside pressure on inflation and spending.

Stronger than expected results could spur a big bounce for the Aussie, especially since the RBA noted in its latest policy statement that it’s monitoring employment data closely. Weak data, on the other hand, could reinforce the view that the Australian central bank is bound to cut rates in an upcoming decision.

Of course there’s also the backdrop of escalating trade tensions as the U.S. and China might be poised to throw another round of retaliatory measures at each other by next month. Not only does this drag the higher-yielding commodity-driven Aussie down, but it also lifts the lower-yielding Japanese yen.

There are no major reports due from Japan this week, which might keep the yen at a good position to take advantage of risk-off and anti-dollar flows.

I’m eyeing a short at 76.75, with a stop at 77.25 and a target at the channel support around 75.25. If I’m able to get in and price action goes in my trade’s favor, I’ll roll my stop to entry when the pair tests the swing low at 75.75.

Care to share your thoughts on this setup?


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