It looks like Aussie bears are encountering another roadblock and pausing at the mid-channel area of interest for this pair. Because of that, I’m gearing up to make these trade adjustments. In case you missed it, check out my initial trade idea first.
Short AUD/JPY Idea
The pair did show stronger downside momentum just after I hopped in at market late last week when risk aversion came back in full swing. However, price seems to be stalling from its dive around the middle of the channel, probably thinking twice before heading further south.
I’m seeing a bit of a bearish flag pattern, though, and this is a classic continuation signal. If price breaks below this short-term consolidation pattern, I’ll be trailing my stop just slightly below my entry to lock in a few pips.
The main event risks for the Aussie this week are the Chinese official PMI readings for May, which might show another round of declines. Analysts are expecting the manufacturing component to dip from 51.2 to 51.0, indicating a slower pace of industry growth that could dampen demand for iron ore and other raw materials from Australia.
As for the Land Down Under itself, quarterly private capital expenditure and monthly retail sales figures are lined up towards the latter half of the week. Both are expected to show small rebounds so I’ll be on the lookout for signs to close early if the actual results turn out stronger than expected.
Japan just printed weaker than expected household spending data with a 1.4% year-over-year slide, twice as much as the estimated 0.7% drop. The unemployment rate was unchanged at 2.8% as expected. Preliminary industrial production and housing starts data are lined up tomorrow, but I’m thinking market sentiment and U.S. bond yields could still be the main drivers of yen movements.
I’ll move my stop down to entry once the pair closes below 82.25, giving me a risk-free trade once the pair shows more momentum, but I’ll also stand ready to jump ship if reports from Australia or China start coming in the green.
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See also: Q1 2017 Trading Performance Review
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