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AUDJPY: Upside Break from Triangle. Time to Buy Australian Dollars?


Yesterday was a topsy-tuvy day for the Australian dollar. AUDUSD spiked from 0.6767 to 0.6794 in a matter of seconds before stabilizing and closing the day 10 pips higher at 0.6786. Meanwhile, AUDJPY surged to a high of 74.09 early in the Asian session and later bottomed to 73.70. The currency pair, however, managed to close the day 24 pips higher at 74.02.

Volatility among AUD pairs in the Asian session was mostly caused by news that the US and China came to a consensus in dealing with issues. Unfortunately, it was later revealed that there has been no resolution on tariffs yet. This is why AUDJPY was not able to sustain its initial rally.

Then later on in the day, RBA Governor Lowe took center stage for his speech. The Aussie rallied when the central bank said that quantitative easing and negative rates are not something that the RBA would resort to anytime soon. His warning that they may use other options if inflation and unemployment decline then caused the Aussie to drop.

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Bad News from China, Good News from Australia

As for today, forex news for the Aussie are mixed.

Earlier today, China released its industrial profits report. It showed Australia’s largest trading partner scored its fastest annual decline in industrial profits since 2011. The report printed at -9.9%, down from September’s reading of -5.3%.

On the other hand, data on the domestic front brought in a wave of positive vibes. Construction work done for the third quarter of 2019 only fell by 0.4% which was better than the 1.0% contraction that analysts anticipated.

AUDJPY Outlook

Since November 14, AUDJPY has been trading in a consolidation. This is evidenced by the currency pair’s lower highs and higher lows. When you connect them, a symmetrical triangle chart pattern becomes apparent. In forex trading, this is interpreted to be a sign that market participants are undecided between the two currencies.

A closer look at the 4-hour time frame, however, shows that AUDJPY may have already broken past resistance at the falling trend line. This usually suggests that they are more buyers than sellers in the market. If this momentum is sustained, we could see AUDJPY rally to 74.29 where last week’s highs are.

On the other hand, if risk aversion dominates today’s trading, the currency pair could easily fall to support at its November 14 low at 73.37.Download our latest quarterly market outlook for our longer-term trade ideas.

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