Trade Recommendation: AUD/JPY

The Australian Dollar/Japanese Yen pair (AUD/JPY) started its downtrend in August 2015 when it broke below support of 90. The price action activated the rounding top reversal pattern on the monthly chart. This triggered a selling frenzy that saw the pair plummet to as low as 72.506 in June 2016. In less than a year, the Australian Dollar lost 20% of its value against the Japanese Yen.

At this price point, AUD/JPY showed signs of reversal. First, the weekly candle had a long wick below its body. This indicated the presence of buyers below 76. In addition, the 4-day, 8-day, and 21-day moving averages were detached from the candle’s body. This hinted that the move down is unsustainable.

Sensing that a bottom was in place, more bottom fishers entered the market. The increased demand sparked a rally to resistance of 90 in September 2017. While bears defended the resistance, bulls appear to be mounting a counter attack.

Technical analysis reveal that the Australian Dollar/Japanese Yen pair is creating a large inverse head and shoulders reversal pattern on the weekly chart. This view comes after bulls generated a higher low of 80.501 in March 2018. The pair has managed to stay above this level for a few months now. This tells us that a move below the higher low is unlikely as participants are willing to enter the market at a higher price.

The strategy is to buy as close to 81 as possible. If bulls hold on to this level, they may spark a rally to our target of 102.

The process may take more than six months.

Weekly Chart of Australian Dollar/Japanese Yen on OANDA

As of this writing, the Australian Dollar/Japanese Yen pair (AUD/JPY) is trading at 82.348 on OANDA.

Summary of Strategy

Buy: As close to 81 as possible.

Target: 102

Stop: Close below 80.


Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.