Partner Center Find a Broker

AUD/JPY is finding sellers at a previously strong resistance area, but is it time to pull the trigger on a short play?

Short-term Resistance on AUD/JPY?

AUD/JPY 4-Hour
AUD/JPY 4-Hour

Got a simple technical setup in the works on AUD/JPY with the pair giving us a kind of double top at a previously strong resistance area. The 84.00 handle was an area of previous support back in February of this year, before breaking on a wave of risk aversion flows on geopolitical fears, and the BOJ giving us a “tiny taper” that brought out the yen bulls in force for the short term.

The pair has since dropped to  the 81.00 area, where support came in on trade war fears easing, enough so that we saw broad yen weakness on risk-on sentiment to bring the pair back up to the 84.00.

So here we are back again, and it looks like it’s a battle between the bulls and the bears this month, with the bears taking the slight edge by holding strong on the 84.00 handle. We can now see a double top type pattern, along with stochastic coming out of overbought levels, both signaling strong resistance.

I like a potential short play in this area on AUD/JPY, but I’m curious to see if that neckline-ish that I drew will break, and how the pair may react to a couple of major economic catalysts: the upcoming quarterly Australian CPI data and the latest Bank of Japan monetary policy meeting. They’ll arrive before the end of the month and we could  potentially see a big pick up in volatility in AUD/JPY before and after each event.

With that in mind, I’m going to  stay in watch mode for now to see if I’ll get a retest of the 84.00 handle or if that rising lows pattern is broken with strong momentum. And if both economic events still favor a short position, be on the lookout for a new trade idea.  Until then as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Risk Disclosure
Pipcrawler’s Q1 2017 Blog Trading Performance

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.