Now that pre-OPEC speculations are out of the way and commodities are in profit-taking mode, the Aussie could resume its slide versus the lower-yielding yen. Here are my entry levels.
AUD/JPY Trade Idea
In my watchlist blog post, I highlighted a small rising wedge visible on the pair’s 1-hour chart. I was also looking at a teeny double top formation that hinted of a potential selloff, but I had second thoughts about putting short orders in ahead of the OPEC decision since this could cause a ruckus for commodities in general.
Now that the oil cartel’s decision seems to have disappointed market watchers, I’m feeling more confident about hopping in a short position on this pair. Besides, the Aussie is also dealing with weak fundamentals both on the home front and from its trade BFF, China.
I’m a bit concerned about weaker than expected inflation readings printed from Japan earlier today, but I think the yen could draw backup support from risk aversion. Geopolitical uncertainties are still in play and subdued Fed tightening expectations on the less hawkish FOMC minutes could also shore up demand for the lower-yielding currency.
Here’s what I got:
Short AUD/JPY at market (83.25), stop loss at 84.75 and initial profit target at 81.75. I’ve risked 0.5% of my account on this setup for a potential 1:1 return-on-risk.
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See also: Q1 2017 Trading Performance Review
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