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An Intraday AUD/JPY Ascending Channel is Creating Scalping Environment

An Intraday AUD/JPY Ascending Channel is Creating Scalping Environment

2011-02-18 21:11:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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January was an extremely volatile month for the AUD/JPY pair, despite only trading in a 250-pip range during that time frame. The month was marked by a descending channel, with the pair touching both the range top and the range bottom a total of ten times; 20-40 pip moves were common. Now, the AUD/JPY is coming off of its 2011 high, and for the time being, with little event risk on the horizon for Australia or Japan, the pair is set to continue within its channel and provide scalping opportunities to traders.

Key Technical Levels

An_Intraday_AUDJPY_Ascending_Channel_is_Creating_Scalping_Environment_body_Picture_1.png, An Intraday AUD/JPY Ascending Channel is Creating Scalping Environment

Charts created using Strategy Trader– Prepared by Christopher Vecchio

February, however, has marked different fortunes for the Australian Dollar, as it has been the strongest currency month-to-date, save the Canadian Dollar. Accordingly, the Aussie has gained the most against the Yen, up 2.94 percent this month thus far. While the ascent has been fairly linear, slight pullbacks have occurred over the past two weeks. With the AUD/JPY pair now testing its upper envelope of the Bollinger Bands, as well as the upper range of its ascending channel, it appears that the pair may be in line for a decline.

An_Intraday_AUDJPY_Ascending_Channel_is_Creating_Scalping_Environment_body_Picture_4.png, An Intraday AUD/JPY Ascending Channel is Creating Scalping Environment

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Looking at the 60-minute charts, the AUD/JPY is having trouble breaking through its last significant Fibonacci resistance of 76.4, at 84.424, seen on the daily chart. The pair remains well above its major moving averages, a clear sign that the overall momentum remains to the upside for the AUD/JPY. Nonetheless, a bearish divergence on the MACD Histogram indicates that the pair is poised to decline. The last time the AUD/JPY pair was at the top of its current channel under similar technical conditions, it declined nearly 100-pips.

Key Support/Resistance Levels to Watch

Indicator

Timeframe

Level

Fibonnaci – 76.4%

Daily

84.424

Fibonnaci – 61.8%

Daily

82.066

Fibonnaci – 50.0%

Daily

80.161

5-SMA

Daily

83.742

20-SMA

Daily

82.850

50-SMA

Daily

82.830

100-SMA

Daily

81.968

200-SMA

Daily

79.726

Bollinger Bands – Upper

120-min

84.553

Bollinger Bands – Lower

120-min

83.705

Quantitative Metrics

Heading into the next few hours, with an ATR of 62 on the daily charts, it appears that there is room to scalp as the pair remains above its significant moving averages and below its 76.4 Fibo. Overall, bullish bias remains, but after appreciating sharply over the past few days, the AUD/JPY pair has hit significant overbought technical levels, indicating a decline may be in order. However, another test of the 76.4 Fibo at 84.424 – coinciding with the range top – may occur before the pair heads south in its current ascending channel.

An_Intraday_AUDJPY_Ascending_Channel_is_Creating_Scalping_Environment_body_Picture_7.png, An Intraday AUD/JPY Ascending Channel is Creating Scalping Environment

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Volatility / Activity Indicators

EURUSD

GBPUSD

USDJPY

USDCHF

USDCAD

AUDUSD

NZDUSD

GBPJPY

EURJPY

ATR (14)

0.0128

0.0137

0.6711

0.0101

0.0068

0.0096

0.0078

1.3689

1.0767

ATR %

0.94%

0.84%

0.80%

1.06%

0.69%

0.95%

1.02%

1.01%

0.95%

5d - 20 d SMA

0.0082

-0.0075

-0.8992

-0.0064

0.0052

-0.0009

0.0102

-2.0730

-0.5527

Bollinger Band

0.0360

0.0426

2.8562

0.0441

0.0195

0.0331

0.0315

6.0606

2.7674

Implied Vol (1wk)

9.4150

8.3075

7.6350

9.7175

7.0700

9.0950

9.2300

9.3300

8.9950

Possible Fundamental Affect

The docket is empty for both Australia and Japan over the next few days, with little economic data due out for any country in the region. After another surprise rate hike by China today, it is unlikely that further unforeseen events will occur over the next few days, removing the possibility that a breakout may occur. However, given the carry trade nature of the AUD/JPY pair, it should be noted that the general trend of appreciation is still expected to continue for the time being.

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Written by Christopher Vecchio, DailyFX Research.

To contact the author of this report, please send inquiries to: instructor@dailyfx.com

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