Good afternoon Trading Floor,
This morning we have seen another impulsive move higher on the AUD following the recent RBA minutes release. The extension of stage four restrictions in Melbourne may force the hand of the RBA during the October meeting. The RBA stated they will maintain a highly accommodative setting as for as long as required. Suggesting a potential rate cut could be on the cards. However, the RBA has taken a firm stance to negative rates therefore there is potentially cap towards the downside on the AUD. There could be a 1 cut and done scenario in play leading into the October meeting.
Data from China has also given the AUD further strength as Retail Sales and Industrial Production data beat the forecast. Given Australia’s reliance on its largest trading partner, it comes as no surprise that the fifth straight month of increased industrial output and the first increase in retail trade since December 2019 fuelled today’s rally. With economic data continuing to improve across the globe the AUD remains in high demand.
AUDJPY – Daily Charts
We have been watching the bullish triangle formation for some time. The market has now retested the broken resistance level and is using that as a new support zone.
AUDJPY – 1 Hour Charts
Looking at the shorter-term time frame there are a number of bullish technical patterns. Firstly, the inverted head and shoulders formation. A break above the neckline will signal a move towards the 1.27% extension, possibly the 1.618% at 78.70. There has been an impulsive 5 wave structure higher followed by an ABC correction towards the key 38% fib retracement zone.
We are now looking to go long on the pair based on fundamental and technical analysis.
Trade Setup: BUY – Market execution, current price 77.31, stop loss 76.70 and take profit target 78.17 – 78.60
Stop loss: 61 pips
Take profit: 86 pips-129 pips
Move stop loss to open price once the market breaks above 77.70.