AUD/JPY Rallies To Fresh Yearly Highs – Initial 2017 Targets In View -

AUD/JPY Rallies To Fresh Yearly Highs – Initial 2017 Targets In View

Jul 18, 2017Jeremy ParkinsonFinance0

Technical Outlook: AUD/JPY closed above technical resistance at 87.55/64 last week, keeping the broader long-bias intact. Price is pushing through the yearly opening-range highs on this stretch with the rally now eyeing our initial yearly target at 90.64-91.23. This range is defined by the 1.618% extension of the 2016 advance and the 50% retracement of the decline off the 2014 highs. Note that RSI is testing the 70-threshold and the weekly close will be important here.

AUD/JPY Daily

Today’s high (so far) registered just pips ahead of the July 2015 swing lows at 89.16 before pulling back. Note that near-term slope resistance converges on this region and further highlights the importance of today’s close. Interim daily support now rests at 87.55/64 with broader bullish invalidation at 86.93. A topside breach targets subsequent resistance targets at 90.03 & 90.64/72.

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AUD/JPY 240min

Notes: A closer look at the 240min chart highlights an embedded ascending channel formation we’ve been tracking off the June lows with price failing to hold above the upper bounds. The immediate topside bias is at risk while below this threshold but the broader outlook remains constructive while within this formation. Interim support at 88.18 backed by 87.55/64.

From a trading standpoint, I’ll be looking for signs of near-term exhaustion here with a pullback to offer more favorable long-entries. Added caution is warranted heading deeper in the week with Aussie employment figures and the BoJ likely to fuel increased volatility in their respective crosses:

Retail has been net-short since June 29th- price has moved 4.1% higher since then

Long positions are 2.6% higher than yesterday but 31.4% lower from last week

Short positions are 1.5% higher than yesterday and 26.4% higher from last week

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY prices may continue to rise. That said, Positioning is less net-short than yesterday but more net-short from last week and the combination of current sentiment and recent changes gives us a further mixed near-term trading bias.

Bottom line: Sentiment is coming off extremes and highlights the near-term risk to this advance. Ultimately, I would be looking to fade a broader pullback in the pair.