Price action on the AUD/JPY daily chart shows that the recent consolidating range just closed out the trading week with a daily close below both the 50- and 200- day SMA. Today’s daily candle is very significant as it signals the first time since April 21st that the price closed below the 50-day SMA. Price has also provided 3 lower highs and two lower lows.
If we do see price action remain under pressure, key support might come from the 93.88 region. It is around that area that we could see a bullish butterfly pattern from. Point D is targeted by the 127.2% Fibonacci expansion level of both the X to A and B to C legs. If valid, a 100 pip bounce may occur before we see the bearish trend return.
If the currency pair is able to recapture the 200-day and surge above June high of 97.28, further upside may target the 98.25 level. To the downside, major support may come from the 91.00 handle.
The trade: Sell AUD/JPY at 94.80, with a stop loss at 95.80 and take profit at 91.80. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading