AUDJPY’s recent downtrend might be over, as price formed a double bottom pattern on its 4-hour forex chart. As you can see from the chart, the pair bounced off the 96.00 major psychological support a couple of times and found resistance at the 98.00 handle, which is the neckline of the formation.
Price is still gearing up to make another test of the neckline, with a potential upside break likely to confirm the reversal. In that case, AUDJPY could climb by an additional 200 pips, which is the same height as the chart pattern. This could lead to a move up to the next resistance at the 100.00 major psychological level.
Forex Chart Setup
Stochastic is already giving the overbought signal though, which means that Aussie bulls are feeling exhausted. If resistance at the 98.00 mark holds, the pair could make another test of 96.00 support and form a triple bottom, which is still a valid forex chart reversal pattern.
Consolidation is also possible, as traders await more directional clues from the market. Earlier today, Australia reported a weaker than expected retail sales increase of 0.1% versus the projected 0.3% uptick. This was also lower compared to the previous 0.4% uptick.
Also released today were Chinese inflation readings, which incorporated the downturn in oil prices. The CPI stood at 1.5% as expected but producer prices marked a worse than expected 3.3% decline, which could mean weaker inflationary pressures down the line and potentially lower demand for Australia’s raw materials.
There are no reports due from Japan, which means no event risks for this forex chart setup yet. However, the upcoming release of the US jobs figures could impact market sentiment and eventually dictate yen price action. Risk-off moves could lead to more demand for the lower-yielding yen while a pickup in risk appetite could spark a neckline break for AUDJPY.
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