AUDJPY: Volatility in Majors Offset Cross Pair, Support in Sight at 89.00
The daily candle chart below shows the price history of the Australian Dollar (AUD) versus the Japanese (JPY) over the past 12 months and trading at 91.97(as of publication) today.
This pair is known by the AUDJPY symbol and also known as Aussie-Yen, and has recovered in today's trading session but looks to be correcting in an downtrend.
Volatility in the Major Currency pairs followed the US FOMC announcement by Chairman Ben Bernanke of plans to reduce its Bond purchasing program as the prospects of economic growth improve.
The corresponding gains in the USDJPY pair that followed along with a loss in the AUDUSD pair had together offset each other when calculating the AUDJPY cross, with the net result of a slight increase in the price of the AUDJPY today. An example of Cross pair calculations can be found in previous posts (e.g. USDJPY*AUDUSD=AUDJPY).
The last time the AUDJPY was covered in the Ideas You Can Trade series, a bullish support line was failing. Today, the trend over the short-to-medium term appears to be continuing lower with more room for bearish price action.
However, the correction of today could continue before new lows are made.A medium term bearish channel (point 3 in red on chart) is providing some support, and what appears to be a develop short term bearish resistance line (point 2 in magenta) which could provide a bearish trajectory towards 89.00. If support near current levels holds, the upper resistance line of the medium term bearish channel (point 3) could be the next target for the AUDJPY pair.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 92.54 with a Limit to take profit @ 92.91 and a stop-loss @ 92.24 Risk/Reward Summary: Limit risk = +37 pips profit / (-30 ) Stop-loss risk = Gain to Loss ratio = 1.23
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 90.97 with a Limit to take profit @ 90.09 and a stop-loss @ 91.29 Risk/Reward Summary: Limit risk = +88 pips profit / (-32 ) Stop-loss risk = Gain to Loss Ratio = 2.75
Medium Term Chart: