AUD/JPY tentatively retreated from key resistance around the 97.28 price area on Thursday. The short-term retreat occurred around 20 pips before forming a bearish Gartley pattern. The AUD/JPY daily chart shows that the rebound and partial recovery from the February 3rd low of 89.36 is under pressure as price attempts to drop below the key 50.0 Fibonacci retracement of the major slide that occurred last winter.
While I expect the Australian dollar to become an attractive currency in the second half of the year as China strengthens, the next month could see this currency pair trade in a more consolidating way. Major support and a possible lower boundary may come from both the 50- and 100- day SMAs at around the 93.00 zone. Further upside may initially be capped by the 98 resistance level.
In the event the recent bullish channel is respected and the 98 area does not hold, bullish momentum may target the psychological 100 handle.
The trade: Buy AUD/JPY at 93.70, with a stop loss at 92.70 and take profit at 97.70. The risk/reward ratio is 1:4
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading