We’ve got a major catalyst ahead for the Australian dollar, making this consolidation chart pattern on AUD/JPY definitely one to watch?
Will the uptrend hold? Or are we looking at the start of a longer-term reversal for the pair?
AUD/JPY 1-Hour Forex Chart by TradingView
AUD/JPY pair is in the midst of an uptrend, a journey characterized by those telltale higher “lows.” However, a formidable resistance zone has cropped up in the 95.50 – 96.00 range, acting as an impenetrable fortress against the bulls.
Adding to the complexity of answering, “where to next?,” lower “highs” have emerged recently, forming a symmetrical triangle right around the 95.50 minor psychological level. Is this a top in the works or just a breather for the bulls?
Zoom in a bit further, and you’ll discover a bustling hub of technical analysis confluence between 94.50 – 95.00. This region resembles a marketplace, where the rising simple moving averages, the significant psychological level of 95.00, the persistent higher “lows” pattern, and the S1 Pivot support technical arguments all converge. It’s a crowded space where traders gather to make their moves.
For those traders with a bullish outlook, keen to participate in the uptrend, keep a vigilant eye on this substantial confluence area. It’s akin to a treasure trove of support arguments waiting to be uncovered. However, before diving in, ensure you have a solid risk management plan in place to navigate a potentially busy price area.
Now, here’s the twist in the plot: The Australian dollar has a major event on the horizon, and it’s causing quite a stir. If, by some stroke of luck, we witness a sustained upside break of the symmetrical triangle, things could get interesting. This breakout could not only attract technical buyers but also draw in fundamental buyers if the Australia CPI event delivers an unexpected surprise.
With both technical and fundamental buyers entering the scene, AUD/JPY might embark on a rapid ascent toward the R1 – R2 pivot resistance area, defying the usual expectations. And considering the daily average true range hovers around 82 pips, we might witness substantial market movements within just a session or two. Fasten your seatbelts, as we might be in for a thrilling ride!
But don’t lose hope, bears. If you’re eyeing an opportunity to get short, a sustained downside break of the extensive confluence area could be your signal. Sellers, both seasoned and new, may emerge in force if that scenario develops, and here’s the kicker: Your chances of success may significantly improve if the Australian CPI report disappoints, falling well below expectations and past readings.
In such a scenario, we could see a southbound journey, possibly as far as the S2 pivot support area, before longer-term buyers potentially reappear with renewed bullish intentions, or maybe we see a desire to take profits from those in a short position. The currency market remains an ever-shifting battleground, where bulls and bears continually vie for dominance.
Lots of ways to play this pair if high volatility kicks in. Just be sure to never forget that fundamentals drives price behavior, so catch up on these potential market moving events of the week before structuring out your own risk management plan!