AUD/JPY has been consolidating in a sideways range for more than a week between roughly 99.90 and 101.35. Let’s take a look at the 1H and 4H charts to get ready for a breakout.
Testing Range Resistance: As we start the week, we see that AUD/JPY has been ranging, but is now testing the range resistance. Last week closed with a bullish bias.
1) Bullish slingshot: Price broke above the 200-, 100-, and 50-hour SMAs then treated the cluster as support.
2) The RSI has mostly held above 40 and has now tagged 70 for the second time during this consolidation. This reflects a build up of bullish momentum even as price action has been sideways.
Bullish Scenario: Now, if price can hold above 100.60, the pressure will remain to the upside for the short-term. If price can break above 101.50, AUD/JPY would also signal bullish continuation.
Consolidation in Bullish Market: The 4H chart shows a bullish market that has been consolidating since making a fresh high on the year at 102.84 in November. A break above 101.50 and a subsequent hold above 100.60 would therefore put pressure on the 102.84 high with risk of breaking higher to at least test the 103 handle. Preferably for the bullish scenario, a pullback will find support in the 100-101.10 area, which would be a better confirmation for a bullish continuation breakout.
Consolidation Support: To the downside, if price does slide back below 100.60, pressure will be on the 99.70-100 area again. Because the prevailing trend has been bullish, we should anticipate buyers even if this area is broken. We should look for a bullish continuation attempt if price reaches down to 99.50 and the 4H RSI is at 30, preferably with a bullish divergence.
Bearish Correction Scenario: Then, we should see if the bullish attempt can break above 100.60 (middle of the range). If not, there might be more bearish correction to come, perhaps toward the November lows in the 98-98.50 area.
Otherwise, we are likely done with a cycle of bearish correction, and will be ready for a bullish continuation attempt towards the 102.85 area again.
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