Australia Markets closed

AUDJPY with a beautiful inverse head and shoulder formation

Tomasz Wiśniewski

The end of the last week and the start of this one are great for the currencies from the antipodes: AUD and NZD. In the battle of those two, the AUD seems a bit stronger, that is why we will focus on the first one. If you trade, you buy one currency against another. It would be wise to buy a strong one against a weak one. That is why, in our analysis, we will pick the AUDJPY, where we do have exactly this combination.

AUDJPY Daily Chart

On the AUDJPY, we can see a very interesting buying opportunity. Today, the price managed to break the mid-term resistance, which was a neckline of the inverse head and shoulders formation or the upper line of the symmetric triangle pattern (for the final outcome it makes no difference). The first signs of the possible optimism started here in March when the price made a false breakout of the 81.5 support (orange). That drop was a part of a bigger iH&S pattern, which resulted in a breakout of the neckline (upper blue). The candle from today leaves no doubts now and gives a clear signal to open a long position. The potential target is very high and is located on the yearly highs from January (red).

All this is happening on the daily chart, so we are talking here about the long-term setup, which can be with us for weeks. If that is the case, we should mention that the swaps for the long position are positive, which makes it a great occasion for the carry trade.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

This article was originally posted on FX Empire