Featured Trade: Bearish sightings in AUD/JPY ahead of FOMC

Bearish configurations seen in AUD/JPY ahead of FOMC

Short-term technical outlook on AUD/JPY (Wed 19 Dec)



Key elements

  • Since its 03 Dec 2018 high of 84.03, the risk aversion sensitive AUD/JPY cross pair has started to integrate back below the median line of its medium-term descending channel in place since 21 Sep 2017 high of 90.30. This price action behaviour suggests a failure bullish breakout on its prior thrust up movement seen on 29 Nov/03 Dec 2018.
  • Interestingly, it past 6 weeks since 09 Nov 2019, the pair has started to evolve into an impending minor bearish reversal “Head & Shoulders” configuration with its neckline support at 80.55.
  • Momentum indicators are negative where the daily RSI oscillator is now breaking below a significant corresponding support at the 46 level after a prior bearish divergence signal seen 2 weeks ago. The shorter-term 1 hour RSI oscillator remains below its resistance at the 52 level. These observations suggest a revival of downside momentum of price action.
  • The key short-term resistance stands at 81.30 which is defined by the upper boundary of a minor descending channel that is taking form since 03 Dec 2018 high of 84.03.

Key Levels (1 to 3 days)

Intermediate resistance: 81.06

Pivot (key resistance): 81.30

Supports: 80.55 (trigger), 79.80 & 78.90/75

Next resistance: 82.35/50

Conclusion

The risk aversion sensitive AUD/JPY cross pair has traced out negative technical configurations ahead of today, 19 Dec Fed FOMC meeting.  A break below 80.55 (the neckline support of the bearish Head & Shoulders) is likely to open scope for a potential impulsive down move to target the near-term support of 79.80 follow by the long-term key support zone of 78.90/75 (the cyclical “triangle-liked range” support from Oct 2008 low, swing lows area of 07 Sep/25 Oct 2018, the lower boundary of the minor descending channel from 03 Dec 2018 high & 1.00 Fibonacci extension of the decline from 03 Dec 2018 high to 10 Dec 2018 low projected from 14 Dec 2018 high).

On the other hand, a break above 81.30 sees another round of choppy corrective rebound to retest the 82.35/50 resistance (swing high area of 01 Oct 2018 & the median line of the medium-term descending channel from 21 Sep 2017 high).  

Charts are from eSignal



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