AUDJPY poised to resume uptrend

In Monday’s “The Week Ahead” video, the extraordinary number of markets that featured three-wave retracements in September, in both equity and currency markets was highlighted.

Charts (3)

After strong trending moves, retracements generally follow. Should the retracements unfold in three waves, the most common of which is a zig-zagging “abc” it’s a good indication the retracements have been a correction and that the primary trend will resume.

Evidence of an “abc” retracement was one of the primary reasons for the long AUDNZD trade suggested here at the end of September, which pleasingly put on 40 pips overnight in the right direction.

For those that took the long AUDNZD trade, the stop loss can now be raised to 1.0755. Should the spot rate reach 1.0920/30 in the coming sessions it would present another opportunity to raise the stop loss, this time to breakeven/entry at 1.0825.

Another currency pair that appears to have completed a three-wave corrective pullback in September and on the verge of breaking higher is AUDJPY. Before examining the technical set up, a few words first on AUDJPY’s relationship with the S&P500.

As can be viewed on the chart immediately below, AUDJPY and the S&P500 exhibit a strong positive correlation. However, over the past 24 hours, AUDJPY has failed to keep pace with the rally in the S&P500, leaving the FX pair room to play some upside catch up, (presuming the S&P500 doesn’t fall far from its current price). The release this morning of stronger than expected Australian home loan data for August should also be supportive of AUDJPY.  

AUDJPY poised to resume uptrend

Moving now to the conventional chart below. Should AUDJPY clear near term resistance 76.00/20 area coming from the downtrend line drawn from the 31st of August, 78.46 high and this weeks 76.17 high, it would confirm our bias to be long AUDJPY looking for a test of resistance 78.30/50.

The stop loss should be placed 5 pips below this weeks 74.94 low, with the view to trailing the stop higher to 75.46, should AUDJPY reach 76.70.

AUDJPY poised to resume uptrend

Source Tradingview. The figures stated areas of the 9th of October 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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