Is risk appetite here to stay? If so, this sentiment lines up neatly with these bullish signals I’m seeing on the long-term charts of AUD/JPY.
Long AUD/JPY Idea
On its weekly time frame, price gained momentum off its bounce from the triangle bottom. This could mean that Aussie bulls have enough energy to take the pair all the way to the top around the 86.00 major psychological resistance.
Zooming in to the daily chart reveals a few more bullish hints. Price formed a small double bottom at the triangle support and has broken past the neckline resistance, also surging above a descending trend line.
The pair also seems to have completed a quick pullback after the breakout, confirming that buyers are ready to push higher.
The latest remarks from Fed head Powell seem to have spurred a bout of risk-taking as the possibility of not seeing higher borrowing costs lifted market optimism. After all, this could keep businesses and consumers in a spending mood, ramping up demand for raw materials and commodities.
However, trade tensions remain a concern, particularly for Australia since it is China’s top trading partner. If Trump emphasizes his protectionist rhetoric even after his meeting with Chinese President Xi during the G20 summit, the Aussie might unwind its latest gains on expectations of more tariffs.
On the flip side, signs that both nations are set to iron trade policies out and put retaliatory measures on hold could prove bullish for the Australian dollar. At the same time, earlier safe-haven gains of the lower-yielding yen could be unwound.
I’m considering hopping in a small long position for now and setting a stop back below the short-term trend line while aiming for the long-term triangle resistance. What do you think?
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