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I just couldn’t help but notice this neat technical setup on AUD/JPY that lined up nicely with fundamentals, so I hopped in at market. Think this was the right call?

Short AUD/JPY Trade

I spotted this descending channel bounce on Cyclopip’s Weekly FX Crosses Watch and grabbed it like a pair of boots on sale! After all, word on Wall Street then was that the U.S. was ready to impose another set of tariffs on China anytime now.

I was able to jump in at market (80.25) before Trump made the official announcement earlier on, and it seems that the pair is just starting to gain bearish momentum. Stochastic has room to head lower before reaching oversold territory anyway.

AUD/JPY 4-hour Forex Chart
AUD/JPY 4-hour Forex Chart

I’m setting my sights on the bottom of the channel just above the 78.00 handle and I’ve got a stop just past the channel resistance and highest Fib.

I’m keeping a bearish Aussie bias because I witnessed how it sank back when the U.S. slapped the first two sets of tariffs and when China retaliated with countermeasures. Now this is the largest amount of Chinese goods targeted (so far) and Trump is threatening another set worth $267 billion.

Oh, and did I mention that Chinese officials confirmed that they won’t take this sitting down?

This could take a heavy toll on Australia’s raw material commodity exports to China, which happens to be the biggest buyer of these items. At the same time, uncertainty stemming from these tensions could benefit the lower-yielding yen while traders hesitate to put money on U.S. assets, too.

I’m just a tad wary of the upcoming BOJ rate decision as the central bank might reinforce its easy monetary policy and spur a yen selloff midweek. As for the Aussie, the release of the RBA minutes seems to be the only top-tier economic catalyst on deck, and this might have a bit more to say on trade troubles.

Here’s what I have:

Shorted AUD/JPY at 80.25, stop loss at 81.25, profit target at 78.25

I’ve risked 0.5% of my account on this position for a 2:1 return-on-risk. What do you guys think of this setup?

Happy

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