The Australian dollar started the trading week higher against all of its major trading partners, despite Chinese data over the weekend that came in below expectations. Both Chinese Industrial Production and Fixed Asset Investment releases suggest that Chinese government support will need to be increased.
Chinese Industrial Production in August increased 6.1% from a year ago, but much lower than the consensus forecast of 6.5%. China’s fixed-asset investment climbed to the slowest pace in 15 years.
Price action on the AUD/JPY daily chart shows that the bearish Gartley pattern that formed on May 14th could be over. Price is tentatively respecting the 82 handle and we could see a higher bounce as commodity currencies remain excessively oversold.
To the upside, key resistance may come from the 50-day SMA, which currently trades at 89.10. Major resistance may come from the 93.50 area. If by the end of the week, we see price close below the noted support level, downward momentum may target the 79.50 level.
The trade: Buy AUD/JPY at 85.25, with a stop loss at 84.75 and take profit at 86.75. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading