I’m still feeling bearish on the Aussie so I’m looking at another potential short play on AUD/JPY. I’m waiting for a bit more momentum before jumping in, though.
Short AUD/JPY Idea
The pair recently tumbled below an ascending trend line that’s been holding since late April and has pulled up for a potential retest. Price is edging close to the broken support but is now consolidating inside a rising wedge formation.
I’m seeing a tiny potential double top pattern as well, so I’m thinking that Aussie bears could come out soon. A break below the wedge support and double top neckline around 83.00 could be enough to confirm that sellers are back in control and that a move towards the lows near 81.75 is in the cards.
In yesterday’s Asian session, Moody’s announced a downgrade on China’s outlook from “stable” to “negative” citing eroding financial strength and slowing growth. Now this could mean even weaker demand for Australia’s commodity exports to its trade BFF, which would then dampen business activity overall growth for the Land Down Under.
Risk-off vibes also seem to be extending their stay in the financial markets owing to geopolitical risks and terror threats, although this has also been a plus for gold. This probably explains why the Aussie is consolidating at the moment, so I’ll just wait if the market shows any confirmation in terms of direction first.
There’s not much in the way of top-tier data from Australia for the rest of the week, though, so any breakouts might be dictated by risk sentiment. As for the yen, Japan has its national and Tokyo core CPI readings lined up.
I haven’t set any entry orders yet but I’m looking to short around 83.00 with a stop past the broken trend line at 84.25 and a target at the recent lows at 81.75 for a simple 1:1 play.
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