Medium term
Trade view / 26 May 2016 at 8:55 GMT

Bias remains to the downside in AUDJPY

Director / PIA-First Limited
United Kingdom
Instrument: AUDJPY
Price target:
Market price:


Since late 2014 the pair has been contained in a large bearish channel formation. 
The last three weeks have been highly indecisive, highlighted by consecutive inside weekly bars.
The MACD oscillator is highlighting bullish divergence, indicating the downwards move is beginning to weaken and we could potentially see a correction higher.

However, the lack of reversal signals leave us to remain bearish overall and the bias remains focused on lower levels.


The daily chart shows the recent consolidation period in more detail. The pair has posted mixed daily results for the last 15 days with spikes seen in both directions. This has resulted in a pennant formation being formed which we currently find ourselves trading midway between.

Yesterday saw an initial dip find buyers above the previous swing low of 78.15 and the downward move being overturned, resulting in a bullish hammer candle being posted. This has led to a further rally through today, however, we view this rally as an opportunity to set shorts in line with the overall bearish move lower.

Historically, 80.00 has been a pivotal level. Bespoke resistance is seen just below here at 79.90, providing a perfect area to set shorts. A rally through this level would face resistance at the pennant top, currently at 80.30, then at the previous swing high of 80.63. Therefore we would look to place our stop above here.

Looking to target levels now and the obvious initial target would be the pennant base around 78.35. Proceeding this we would look to target just above the February low of 77.57.
Note that these parameters would therefore offer a reward/risk ratio of virtually 2:1 at the first target.

Management and risk description

After the triggered trade moves below 78.90, we would look to move our stop to entry level.


Entry: sell at 79.90

Stop: 80.70

Targets: 78.35 and 77.65

Time horizon: Medium term.

Source: Saxo Bank. Create your own charts with SaxoTrader click here to learn more 

 Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more


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