AUD/JPY Coming Up from an Inverted Head and Shoulders

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AUD/JPY Coming Up from an Inverted Head and Shoulders

The AUD/JPY has been in a bearish trend since November’s and 2014’s high at 102.84. Before that the market had some choppy moves with month-long swings, but the direction was unclear. We will see that in the daily chart, but first let’s examine the 4H chart:
audjpy 4h chart 2/9
(click to enlarge)

As we can see in the 4H chart, price action has formed an inverted head and shoulders. The shoulders came down to around 90.50-90.75 while the neckline was a little above 92.00. At the end of last week, price cleared the 92 handle, officially completing the inverted head and shoulders pattern .Note that this rally also broke above a falling speedline as well as the 50-period SMA. The 4H RSI has broken above 60, showing loss of the prevailing bearish momentum.

To start this week, AUD/JPY retreated but found support above 92.00, respecting the price bottom and thus exposing further upside risk towards the 94.60 area, which is a support/resistance area, up to the 95.00 handle, which was also a common low in mid-January’s price action. Further around 95.00, price will be testing the 200-period SMA, and a falling trendline we will see more clearly in the daily chart.

So, if the AUD/JPY is to remain bearish in the medium-term, the short-term bullish outlook this week should be limited to the 94.60 up to 95.00. A break above 95.00 will likely liberate the AUD/JPY into further uptrend, and the medium-term outlook would have shifted from bearish to neutral if not bullish.

AUD/JPY Daily Chart 2/9
audjpy daily chart 2/9
(click to enlarge)

Before the most recent 3-month drop, AUD/JPY was in month-long swings without clear direction since 2013.

We can also see the falling trendline coming down from 102.84, the 2014-high. Let’s look for sellers here especially if the daily RSI approaches 60 and stalls.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.