AUD/JPY Price Analysis: Yearly Low Exposed After Early-March Reversal

2018-03-07 18:00:00

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AUD/JPY Daily Price Chart
AUD/JPY 120min Price Chart
AUD/JPY IG Client Sentiment
Relevant Data Releases

AUD/JPY turns from 2017 lows- rebound testing initial resistance
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AUD/JPY opened the week just above a key support pivot with a rebound in price taking the pair back towards downtrend resistance. The focus is on a break of a near-term range as we look for evidence that a larger recovery may be underway within the context of the broader downtrend.

AUD/JPY Daily Price Chart

Technical Outlook: In this week’s Technical Perspective we noted that AUD/JPY was testing a critical inflection zone at 81.58, “into the weekly open and IF price is going to rebound, this would be a good spot.” Indeed the pair rebounded after testing this key support threshold with the advance turning just ahead of confluence resistance at 83.38. The immediate focus is on a break of range with a breach above the median-line needed to fuel the next leg higher. That said, a break below would keep the broader short-bias in play targeting the sliding parallel (red) and the 61.8% retracement at 80.57.

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AUD/JPY 120min Price Chart

Notes: A closer look at AUD/JPY price action highlights a near-term descending pitchfork formation extending off the January highs with the pair rebounding off a sliding parallel (red) extending off the 2/14 low early in the week. The advance encountered resistance at 83.28/38 yesterday- note that this threshold converges on the median-line and a breach / close above would be needed to suggest a more significant near-term low is in place. Such a scenario eyes subsequent topside resistance objectives at 84.25/38 backed by the upper parallel.

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Interim support rests with the 61.8% retracement of the advance at 82.19 with a break below 81.58 needed to put the bears back in control targeting 80.57/68. Bottom line: We’re looking for evidence that a near-term low is in place and on the back of what looks like a clear five-wave advance off the lows, we’ll favor fading weakness while above 81.58.

From a trading standpoint, I’ll be looking for a pullback here to offer favorable entries targeting a break higher. Ultimately, we’d be looking to sell a larger rally up towards the upper bounds of this formation. Keep in mind we still have the release of the Bank of Japan (BoJ) interest rate decision on Friday.

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AUD/JPY IG Client Sentiment

A summary of IG Client Sentiment shows traders are net-long AUDJPY- the ratio stands at +1.57 (61.1% of traders are long) – bearishreading
Traders have remained net-long since Feb 8th; price has moved 4.3% lower since then
Long positions are 1.1% lower than yesterday and 14.6% lower from last week
Short positions are5.2% lower than yesterday and unchanged from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDJPY prices may continue to fall. Retail is more net-long than yesterday but less net-long from last week andthe combination of current positioning and recent changes gives us a further mixed AUDJPY trading bias from a sentiment standpoint.

See how shifts in AUD/JPY retail positioning are impacting trend- Learn more about sentiment!

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