The Australian dollar rallied against the Japanese yen last week after risk sentiment improved and price respected the psychological .7900 handle. The currency pair is down modestly to start the trading week, but may see its bullish rebound extend gains if the Bank of Japan expands its monetary policy easing measures. While we may see a continued bounce here, evenually sellers may look to return around the 88.00 region.
Price action on the AUD/JPY daily chart shows that on December 4th, price formed the bearish reversal Gartley pattern and respected the 200-day SMA. Point D was confirmed with both 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.
The bearish reversal took price below the 200-, 100-, and 50-day SMA(s). The selloff extended slightly below the $81.43 level, which is the 200.0% Fibonacci expansion level of the $89.36 to $97.28 move. If price continues to rally this week, further upside may target the 100-day SMA, which is trading at the $86.17 level.
If we do see a rally here and bearish momentum returns, we could see price target the psychological 80.00-80.50 zone. If we see a daily close below that key support region, bearishness may continue towards the $78.50 level. Major support may come from the 75.00 handle.
The trade: buy AUD/JPY at 82.50, with a stop loss at 81.50 and take profit at 85.50. The risk/reward ratio is 1:3