AUD/JPY Breaks Multi-Month Consolidation to Fresh Highs

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AUD/JPY Breaks Multi-Month Consolidation to Fresh Highs

AUD/JPY just broke into fresh highs on the year during the 8/21 session after consolidating since April. AUD/JPY’s price action in 2014 can be described as bullish in Q1, then neutral since Q2 after price hit a high around 96.50.

You can say that price has been in a sideways market, or you can also say that it was in an ascending triangle. The most important thing in the daily chart is that during this multi-month consolidation, price preserved the bullish bias by staying above the 200-day Simple Moving Average (SMA). Also, the daily RSI has held for the most part above 40 – a sign that bullish momentum is maintained. Even if you argue that it broke below 40 in May, it at least held above 30, which shows lack of bearish momentum.

AUD/JPY Daily Chart 8/22
audjpy daily chart 8/22

(click to enlarge)

The daily RSI is now pushing towards 70, but it has not reached it, so there is still room to run up before traders see an overbought condition in the daily chart.

The next resistance pivot is at 97.43, the Feb. 2013 high. Above that we are looking at the 99.95-100.00 pivot. The weekly chart shows that the market is bullish indeed, based on the 200-, 100-, and 50- weekly SMAs – in bullish alignment, with price trading above them.

The RSI reading also affirms bullish momentum, as it has held above 40 for the most part since 2013 after it tagged above 70 and even 80.

AUD/JPY Weekly Chart 8/22
audjpy weekly chart 8/22

(click to enlarge

Buy on a Dip? With upside towards at least 97.40, traders might be considering a buy on a dip for strategy, for example if AUD/JPY slides back to 96.00.

A break below 95.00 might shelve this bullish outlook and put the AUD/JPY back into consolidation mode. So at 96.00, you have barely a 1.5:1 reward to risk based on a conservative outlook to 97.50. A slightly more aggressive bullish projection to 100.00 would give a 4:1 Reward to Risk. So our R:R is probably just good enough if we plan to buy on the dip around 96.00.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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