Good afternoon team,
The move lower on commodities has taken risk on currencies with them. The AUD, NZD and CAD have all declined over the past week as China announced measures to support the commodity market. However, the market appears to have stabilised to the downside now with key support zones coming into play. The AUDJPY has been on our watch list for a reversal opportunity based on a number of technicals and fundamentals.
Yes, the FED shocked the market last week as an increased number of FED members reported they expect two rate hikes in 2023. However, in the short term, the Biden administration is proposing a $6 trillion green energy infrastructure stimulus package and the FED is maintaining its current bond purchasing program. So, despite the recent risk-off move in the market, there are a number of bullish fundamentals that are operating in the background which support a risk-on sentiment, meaning a weaker JPY.
AUDJPY 1 Hour Charts
Triangle formations can only occur in wave b or wave 4. Therefore we see a possible triangle to complete wave b with a breakout to the downside to complete wave c which is subdivided into 5 waves. This potentially means the correction is complete.
The market is very bearish at the moment, and based on our mate Warren Buffet, be fearful when others are greedy and greedy when others are fearful, it could be the time to start thinking about long positions as the majority of the market is expecting further downside.
Trade Setup: BUY Market Execution, current price 82.99, stop loss 82.09 and take profit OPEN – Initial target at 85.39.
Stop loss: 90 pips
Take profit: 240 pips
JPY (JXY) Currency Index
The JPY index has broken to the downside of a triangle formation/ bear flag structure, which indicates long term weakness may resume.