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.
Stop: Close below 80.
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