Partner Center Find a Broker

It looks like the Delta variant is becoming a serious threat to the pandemic recovery, sparking defensive moves across the financial markets.

Could this be the catalyst to push traders back into “safe havens” like the yen? If so, we’re checking AUD/JPY for a potential longer-term bearish play.

Longer-term Bearish Reversal in AUD/JPY?

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

The negative pandemic theme has been picking up steam over the past few weeks, especially over in Asia where covid-19 related deaths skyrocket. It’s highly likely this trend will continue on as long as vaccination efforts continue to be sluggish in the region.

As far as the rest of the world, cases are steadily on the rise as well, likely adding fuel to speculation that the economic recovery across the globe may have seen a top and will likely be bumpy at best for the next few months.

If this continues to be the dominant theme, then AUD/JPY is a pair to check out for a potential longer-term short position as the Japanese yen tends to benefit from risk-off environments, and as the Aussie would be the most likely fall relatively quickly.

Also, its close ties to the Asia region may affect Australia’s economic recovery quickly if Asia continues to fall to the spread of the delta variant, as well as likely push the government to keep extending the current lockdown protocols.

Is JPY stronger than AUD? Check out our newly released Currency Strength Meter!

From a price action standpoint, AUD/JPY seems to already be turning lower after topping out just under the 85.00 – 86.00 trading area. The next price signal to watch is a sustained break below the 80.00 major psychological level, and if that does hold and pandemic concerns remain, that could draw in more sellers to spark a momentum move lower.

Until then, we’ll also be watching short-term bounces on the pair, something we may see soon as the stochastic is indicating oversold conditions, and as the shorter timeframe analysis from Big Pippin shows potential buy signals possibly forming this week. If the pair bounces and the above mentioned environment remains, we’ll also be looking out for bearish reversal patterns from 82.00 – 85.00 for a potential short entry there.

What do you guys think? Is AUD/JPY in the midst of a new move to the downside? Will the world be able to stem the spread of covid-19 variants? 

Let me know in the comments below, and 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.

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.