On June 20th, we had recommended taking a long position in the AUDJPY pair at 77 levels with a target of about 82. Alternatively, we had suggested purchasing a one-touch call option with a strike price of 80. Within a week, the target was achieved. In fact, the pair gave another chance to enter and exit at almost the same levels. A downgrade of the Australian debt by the S&P and a lower than expected change in the employment data pulled the cross back to 78.50 levels. However, there are some interesting developments, as explained below, which makes us believe that the AUDJPY pair is going to see a huge uptrend in the next few weeks.
After seeing his party win in the recently concluded election to garner more than a two-thirds majority in the upper house, the Japanese Prime Minister Shinzo Abe announced that he will instruct the economic minister to prepare a new economic stimulus package for Japan. The firm statement made by Abe weakened the Yen to a low of 106 in a matter of two weeks’ time. The analysts are of the opinion that unless and until the BoJ announces a package that will outrun the expectation of market participants, the Yen will continue to remain bullish. Thus, we can be certain to expect the BoJ to make a major announcement during the meeting scheduled later this week.
On Wednesday morning, the Australian Bureau of Statistics reported a 0.5% q-o-q rise in the trimmed mean consumer price index (CPI). The second-quarter CPI data also topped the analysts’ estimate of 0.4% growth on a sequential basis. On a y-o-y basis, the CPI increased 1%. Thus, we can anticipate the Aussie to rise and the Yen to fall in the coming days.
Technically, the AUDJPY currency pair is on a decline mode. However, as the chart shows, the pair can be expected to make sharp reversal after reaching a level of about 77. The probable pattern of price movement and the anticipated stochastic indicator’s path is shown in dotted lines. Since the primary trend is on the upside, taking a short position for a mere 100 pip profit with a risk to reward ratio of just 1:1 is not reasonable.
Thus, it is better for a Forex trader to wait for the dip to get completed and take a long position near the 77 level. A stop-loss order can be placed 200 pips below the point of entry. The long position can be winded at 83.50. The risk to reward ratio is about 1:3 for the suggested trade.
A binary trader should contemplate entering a one-touch call option trade in the current scenario. The strike price for the one-touch call option trade should be 83 or lower. The trader should also look for an expiry date on or after the 21st of August.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
