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  • AUD/JPY bears lurking at a critical resistance area in risk-off markets.
  • The technical environment is also bearish on the 4-hour time frame. 

Further to this week’s, The Chart of the Week: AUD/JPY bears step up to challenge the bulls at key resistance, the price has been in a choppy consolidation, albeit trading with a bearish bias. 

The following recaps the bearish thesis and brings us up to date with the latest price action developments and trade setup. 

In the original analysis at the start of the week, the downside was in focus as follows:

Daily chart, prior analysis

The price had been rejected at a critical resistance structure on the daily chart, reinforcing the near-term bearish bias in what was expected to result in an extension of the last bearish impulse. 

Between then and now, there have been a couple of failed attempts by the bears as the price moves in a sideways chop and range bound. 

Optimal entries on the 4-hour time frames managed with a trailing stop loss would have resulted in a breakeven outcome worst-case scenario, and that’s ok. 

Prior analysis

The price was expected to melt from a 4-hour perspective, but…

Subsequent price action & position management 

As it happens, the price moved towards stop loss before melting far enough for the stop loss to be moved to breakeven.

The price reversed and took the trade out for a breakeven. Back to the drawing board!

Live markets

Meanwhile, as per the original analysis forecasted, risk-off has been the dominant theme for the week which has intensified on Wednesday and the correlation between Wall Street and AUD/JPY speaks for itself. 

(15-min chart)

4-hour setup

The price is in a bearish environment while below the 21 moving average and with MACD below zero:

Bears can protect an optimal entry point with a stop-loss well above the dynamic counter-trendline and reinforced by the 78.6% Fibonacci retracement level of the bearish impulse:

A target to the -0.272% Fib of the bullish correction’s range offers a 1:3 risk to reward high probability opportunity.