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This week’s not-so-dovish RBA statement might be a game changer for the Aussie, and could be enough to keep AUD/JPY above its channel support.

Long AUD/JPY Idea

This pair has been cruising inside an ascending channel visible on its daily time frame and is currently testing support. A small bounce seems to have already taken place even after the RBA sat on its hands as expected.

As it turned out, the central bank sounded more optimistic about non-mining activity and how investment has improved further in that industry. Policymakers also revised their outlook on inflation from previously predicting that “inflation is likely to remain low for some time” to how CPI could pick up gradually.

AUD/JPY Daily Forex Chart
AUD/JPY Daily Forex Chart

All in all, the RBA statement seemed to be less gloomy this time around, which represents a bit of a shift from their earlier announcements. Oh, and did I mention that Governor Lowe refrained from jawboning, too?

But enough about the Aussie! When it comes to the Japanese yen, it seems that it continues to take cues from dollar price action, bond yields, and market sentiment. And with U.S. tax reform taking one step forward at a time, the lower-yielding yen could slide lower in effect.

Besides, corporate tax cuts in the U.S. could shore up business activity and demand for raw materials from commodity-driven nations like Australia. This would also likely keep risk appetite supported, which is bullish for the higher-yielding Aussie.

Stochastic is already pulling up on the daily time frame to signal a pickup in bullish energy, which might be enough to take the pair up to the channel resistance or at least halfway there.

I’ve hopped in a long position at market and set my stop below the latest dip, aiming for the mid-channel area of interest as my initial target. Here are the deets:

Long AUD/JPY at 86.00, stop loss at 83.75, profit target at 89.75 for a potential 1.67-to-1 R:R.

I’m a bit worried, however, because the Australian GDP reading just missed the consensus by a notch for Q3 earlier today and this seems to be erasing the pair’s gains at the moment. Think I should cut my position early or keep holding on?



See also: Q3 2017 Trading Performance Review

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