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AUDJPY’s May Become Scalping Target As Technical Levels Converge

AUDJPY’s May Become Scalping Target As Technical Levels Converge

2010-07-09 15:09:00
John Rivera, Currency Analyst
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The AUD/JPY has traded in a tight pattern over the past two days as risk appetite has faded leaving the pair directionless. An apparent bear market rally has started to fizzle out but fundamental reports pointing toward sustained domestic and global growth have ease concerns over the impact of declining government spending. The pair remains a proxy for risks sentiment and with bulls and bears nearing a stalemate we could see subdued price action continue. Additionally, heading into a summer weekend we typically see markets quiet.

Key Technical Levels

SR-10-07-09-01

A descending trend line and the 50-Day SMA at 78.16 are converging to form a solid barrier of resistance for the AUD/JPY. Therefore, we could see an inflection point develop as the recent bullish rally has slowed. The 20-Day SMA is also converging at 77.11 adding to the case for an extended period of consolidation.

SR-10-07-09-02

Quantitative Metrics The AUD/JPY has seen its ATR steadily decline as volatility for the pair has eases. However, at 182 pips it is still one of the most active pairs increasing its risks as a scalping target. Additionally, a Bollinger Band width of 1,068 pips is another red flag as that level of variance makes it difficult for high frequency traders to execute their strategies. Yet, the broader trend of declining one week implied volatility readings is a sign that any sharp moves could see limited follow through, diminishing potential risks.

 SR-10-07-09-03

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