AUDJPY: Eyes Major Confluence ?

AUD/JPY – Charts & Analysis

As of writing: Strength Vs Weakness Tables Standings

• AUD is showing W2 and W3 (Weak) on the Trend and Day trading tables respectively
• JPY is showing S1 and S2 (Strong) on the Trend and Day trading tables respectively

Link to LIVE/Rolling Strong/Weak Tables HERE

Observations:

• The Weekly chart above shows:
  • A confirmed uptrend, anchored March 2020, formed Dec 2021 and tested Jan 2022
  • Since testing this trend has returned
    • 1520 pips to its highest price (95.74)
    • 880 pips to its current price (89.43)
  • This week and last has seen price retrace back to and test the 90.00 multi-support/resistance handle
  • This retracement from the 96.00 high has in itself created a tested minor bear trend/channel

• ADX: Shows buyers retaining the upper hand, albeit a weak hand, as price retraces toward the 85.50 support zone
• Stochastic: Indicative of a pullback, Stochastic shows selling momentum, here seen entering oversold territory. We watch this indicator awaiting confirmation of the resumption of buying momentum

Observations:

• The Daily chart above shows:
  • A huge potential confluence of levels circa the 85.50 handle as follows:
    • Firstly, the 85.50 handle itself which has stood as resistance back in March, May, Oct and Nov of ’21before being tested again and finally giving way to a breakout in March of ’22
    • Secondly we observe the afore mentioned Bull Trendline (Weekly Chart, observations above). Any contact with this rising trendline will be a second test of this trend
    • Thirdly we note the now rising 200 SDMA level (currently 84.55) in support of the rising bull trendline
  • The confluence of these three elements will be paramount to traders everywhere as/if/when price should approach the 85.50 handle
• ADX: Here, on the lower timeframe, we see sellers in control, albeit marginally with little by way of supporting downside trend strength
• Stochastics: Always more sensitive, particularly on the lower timeframes, indicates recent buying within the minor bear trend/channel depicted on the above chart
  • We also note the confluence of the Stochastic indicator with current price, both of which are setting lower highs

Current Narrative:

• The current narrative is clearly to the downside, with sellers overall in control, happy to short price into a bear trend/channel on the back of overall Antipodean weakness paired against JPY safe haven strength
• Whilst this narrative is clearly true, traders are well aware of the bigger picture uptrend that lays beneath. As such:
  • Selling the highs on contact with the minor downtrend with an eye to 85.50 handle is a fairly safe bet
  • On approach to the 85.50 handle traders will likely place smaller positions
  • On contact with the 85.50 confluence zone traders will likely exit the pair completely, awaiting fundamental drivers to dictate momentum either:
    • Through the confluence zone toward the Dec ’21 / Jan ’22 lows circa 80.50, or
    • In favour of the 85.50/rising trend/200 SDMA into the next bull leg, eyeing the 90.00 handle

My Trade Plan:

• Given the above I am holding fire on this pair at the moment, awaiting the outcome of the 90.00 multi-support/resistance handle.
• Should price break decisively below this level I will, in line with my Strength Vs Weakness Tables, seek to short this pair on contact/retest of bear trend/channel falling resistance as it offers me a safe stop placement above
• Should a short opportunity transpire I will seek to take profit upon contact with bear trend/channel support

Strength/Weakness Caveat:

• A removal of either of these currencies from my S/W Trading Tables (HERE) would of course negate this entire trade plan