Price action on the AUD/JPY daily chart shows that the bearish Gartley pattern that formed on May 14th could be over. Price is having its largest rally in two weeks and is tentatively breaking out above the 200-day SMA.
The Australian dollar is stronger against most of its major trading partners after the RBA kept rates steady and failed to signal a future rate cut despite a weakening economy. Mining spending remains vulnerable to further cuts and elevated housing prices are raising fears of a housing bubble. The rebound also benefited to some profit taking that hit the U.S. dollar early in Europe.
If the currency pair is able to surge above last month’s high of 97.28, further upside may target the century mark. To the downside, key support will come from both the 50- and 100-day SMA which are currently trading just under the 94.00 handle.
The trade: Buy AUD/JPY at 95.60, with a stop loss at 94.60 and take profit at 98.60. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading