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With China-U.S. trade war fears lingering, the Aussie could be facing the greatest risk for declines among its peers. And with dollar demand also looking shaky, the yen could enjoy more safe-haven flows.

Short AUD/JPY Idea

On the pair’s weekly time frame, I’m seeing a complex head and shoulders pattern that signals a possible long-term selloff. Price has yet to test and break below its neckline around the 73.00 level before confirming this, though.

The right shoulder is looking like a short-term double top that just broke below the neckline, which reflects the presence of bearish momentum that could take it down to the next floor.

AUD/JPY Weekly Forex Chart
AUD/JPY Weekly Forex Chart

I’m thinking of hopping in a small position at market with a stop past the short-term tops at 92.00 and an initial target close to 73.00. I’m a bit worried about stochastic indicating oversold conditions, though, and potential profit-taking as the end of the quarter approaches.

Although recent headlines have suggested willingness to negotiate from both the U.S. and China, it has also been very clear that neither party is willing to be pushed around. This could mean more tensions as leaders try to hash out a deal, and I wouldn’t be surprised if Trump’s tweets do more harm than good.

I’m inclined to wait for a bit more confirmation before hopping in as the potential return-on-risk still seems pretty reasonable if I aim for the next longer-term support areas. I’ll keep y’all posted if I jump in!



See also: Q4 2017 Trading Performance Review

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