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AUD: JPY - Sell on trend break

CMC Markets

With company and commodity markets being sold last night, the Aussie: Yen chart might be one for swing traders to watch if we do at last get a "risk off" correction in the near future.

Daily Chart

The major uptrend in Aussie: Yen has been strong and without a significant correction since October.  This leaves us well above both the 200 day moving average and the nearest significant support. There's plenty of scope for a decent move lower, even if the eventual correction is relatively minor in percentage terms.

This trend is not a "freight train to stand in front of" until the market starts to provide clues of  imminent change e.g. flagging momentum, a break below support or rejection of resistance. For more than 2 weeks though, the market has been basically moving sideways and is now putting together a pattern that could be of interest to reversal traders.

AUD: JPY CFD - Daily. Source: CMC Tracker

4 Hour Chart

I've highlighted an emerging wedge pattern on the chart below.

AUD: JPY CFD - 4 Hour

Two potential approaches to this pattern could be:

  • Sell on a break below the support. In this case, one way of handling the stop would be to place it above resistance inside the pattern itself (this is shown on the chart) or
  • Sell if price bounces off the support but again fails at the resistance line. In this case a stop could be placed above the wedge resistance

If there is a setup here, profit strategies could be built around the Fibonacci retracement levels shown on the daily chart. Typically, a correction of a move like this would retrace at least 38.2%.


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