AUDJPY may be in for a larger wave lower, as price recently broke below the support of the ascending triangle FX setup on its 4-hour time frame. Take note that the chart pattern is roughly 500 pips in height, which suggests that the resulting breakdown could last by the same amount.
Shorting at market with a stop above the top of the triangle at 96.00 could yield a high return-on-risk of around 5:1 if one aims for the 91.00 major psychological support. Adding every 100 pips could improve the return but it would be prudent to trail the stop in order to protect profits.
FX Setup and Scenarios
However, if this proves to be a fakeout, AUDJPY could make a FX setup rally back up to the top of the triangle at the 96.00 mark. In the unlikely event that buying pressure builds up, an upside break from the triangle resistance is also possible.
Bear in mind that Australia just printed a very weak jobs report earlier in today’s Asian trading session, keeping any AUD rallies at bay for now. The report showed a 0.3K decline in employment for July instead of printing the estimated 13.5K gain. With that, the jobless rate surged from 6.0% to 6.4%, marking a 12-year high in joblessness for Australia.
Japan has had its fair share of bleak data as well, with retail sales and industrial production missing expectations for the past few months. Despite this, the BOJ maintained its optimistic stance and mentioned that further easing isn’t necessary since the impact of the sales tax hike will soon fade.
With that, the FX setup bias for this pair is still to the downside, as risk aversion also continues to weigh on financial markets in the past few days.
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