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AUD/JPY – a quick 100 pips

Oil about to take off? A quick resolution to the land scandal swirling around the highest levels of finance in Japan? I don’t know, and frankly it doesn’t matter. There are three technical factors pointing to a quick bounce in AUD/JPY, and I’ll sort out the fundamental contributors later.

  1. A bounce off technical support at 81.50. This is a long term support level, best viewed on the weekly chart (not shown).

  2. Divergence between the AUD/JPY price and the RSI. Importantly the price made a low at the same level as the preceding low, but the latest low in the RSI is higher – possibly a sign of building strength.

  3. The price punched through the lower Bollinger band, and reverted back up through the band. The bands are not widening. This is a classic BB signal and indicates a potential return to the simple moving average (dark green line, just above 83.00).

How traders utilise this cluster of signals depends on the individual’s trading plan – if they use it at all. One approach is the classic BB reversion trade. AUD/JPY is a buy at current levels, with a stop loss at 81.40 (below the 81.50 support). The target is 82.90, just below the simple moving average. A win/loss ratio of 101 pips / 49 pips is slightly better than 2 / 1, meaning it fits my trading plan.

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