The Aussie has been on a five-week winning streak against the Japanese yen. In fact, looking at the performance of AUDJPY for the past month, the currency pair is up over 3% from where it opened at 74.08.
Neckline Break of Inverse Head and Shoulders
On the weekly time frame, we can see that its recent rally has allowed it to break resistance at the neckline of the inverse head and shoulders pattern around 75.50. In forex trading, this pattern is typically seen as a bullish indicator. This is because the higher low which happened after the market made two consecutive lower lows could be an indication that sellers are getting weaker.
Before you go aggressively buy AUDJPY though, there is a confluence of resistance that the currency pair will need to clear. For one, there is resistance at the falling trend line when you connect the highs of January 7, 2019 and December 2, 2018 at around 77.56. The 100 SMA which falls around 78.62 could also serve as a ceiling as it has done so in the past (AUDJPY was rejected at the SMA in March to June 2018). If there are enough buyers to clear those resistance levels, the next price to watch out for is 80.70 where the currency pair peaked in 2019. This price also seems to coincide with the 200 SMA.
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Potential Pullback on AUDJPY?
There is also the possibility of a pullback on AUDJPY before it begins another bullish rally. On the daily time frame, we see that it has room to move lower when we take into consideration the rising trend line (from connecting the lows of August 27, October 9, and December 10). It could trade lower to 84.85 and test the trend line for support as well as the 61.8% Fib level (wheny you draw from the low of December 10 to the high of December 27). This price also seems to fall in line with the 100 SMA.
If support at this level does not hold, you can look for the pair to trade lower to its December 10 lows at 73.80.
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