AUD/JPY Correction Entry Set Up: Aussie Weakness and a "Risk Off" Play

Monday, May 7, 2012

As the Australian economy and dollar prepare for tonight’s 9:30pm EST release of the Trade balance number, the aussie is rallying against the yen, dollar, and loonie today. But each of these pairs are in bearish trends on the daily time frames, with the best clarity on the AUD/CAD and AUD/JPY.

The AUD/CAD has already triggered the swing short that I highlighted in the prior update, so that’s a trade that is already moving lower.

Past performance is not indicative of future results

The 240-minute AUD/CAD has triggered the swing short as prices corrected higher into the swing short zone between the 20 period SMA close and the 34 period EMA low.

 

With the move in crude bouncing from the 200DMA, the loonie got a boost from a resilient crude oil market but there’s no doubt that the sub-100 level on crude oil remains the line in the sand and crude bulls will want to retake this major psychological level as much as crude oil bears want to see it established as a ceiling.

Past performance is not indicative of future results

Crude oil has bounced with the U.S. equities market holding steady through what looked like a potentially bearish Monday open. This in turn helped the loonie. But remember that the loonie has a hawkish BOC behind it as it may be the first G7 country to hike rates. This morning’s much-better-than-expected Building Permits number helped boot the loonie as well.

 

The Dow Jones Industrial Average has managed a close above the 13, 000 level but this in itself should not be seen as a clear sign of RISK ON. In fact, the intraday correction on the 240-minute chart of the Dow shows that the correction to the 50% Fibonacci Retracement level has failed to attract buying support and therefore must still be seen as resistance. Again remember this is the YM futures contract which has also closed the morning gap down.

Past performance is not indicative of future results

The daily YM futures contract shows the gap down close as well as the market slipping back below the 50% Fibonacci Retracement level.

 

The AUD/JPY in the meanwhile could benefit from tonight’s volatility, in fact, it will need it to trigger a short from the 20 period SMA close (aggressive) and the 34 period EMA low (conservative).

Past performance is not indicative of future results

The 240-minute AUD/JPY has 82.00 level major psychological level resistance as well as a bearish Directional Bias helping fortify the swing short area as an area of exhaustion on a rally higher.

 

As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.
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