Quasimodo Pattern in AUDJPY, Valid or Not?
AUDJPY is in a Bullish Trend which Seems to be Ending, Will There be a Reversal?
The surge in cases of the Omicron virus in Australia may disrupt the rise in AUDJPY. Indeed, the economic situation in both countries, both Australia and Japan, is not doing well. Australia, which is battling Omicron, had to be forced to lock down, destabilizing the economy. Meanwhile, inflation in Japan is also very high, even the Bank of Japan expects inflation to rise again to reach its highest level in the last 2 years. Technically there is a possibility that AUDJPY will corrected.
Quick Recap on AUD/JPY
At first glance, AUDJPY still tends to stagnate with less significant movements in the long term. However, in the short term, the pair looks bullish with little hint for an immediate correction.
Let's dive in a little deeper to see how AUD/JPY fare on multiple timeframes:
AUD/JPY Monthly Technical Analysis
On a monthly basis, AUDJPY looks choppy, with moving averages between 50, 100 and 200. Last month's candle closed bullish in the ranging area for the monthly timeframe. There is a possibility the monthly 200 MA line can hinder the pair's advance.
AUD/JPY Weekly Technical Analysis
Last week AUDJPY created new resistance after being closed bearish, but rose again after bouncing from the 100 MA line. This week's candle has already crossed the lowest limit of last week and is still moving with a bullish tendency.
AUD/JPY Daily Technical Analysis
On the daily timeframe, we can draw a trend line connecting the highest point since October 2021 and this line is still valid on January 5th where the price bounced down after hitting this trendline. On the other hand, there is an ascending trendline that was formed since last December. These two lines seem to be meeting soon and cause the triangle pattern of AUDJPY to be broken soon.
Trading idea for AUD/JPY
On the H4 timeframe, a Quasimodo or head and shoulder pattern appears after the price broke the support at 82,820 and now it might retest to the right shoulder area to go down soon.
Order: Sell Limit
Stop Loss: 84.400
Target 1: 83.300 (50% + BE)
Target 2: 82.500(25%)
Target 3: 80.800 (25%)
Risk total: max 1% Equity (High Risk Setup)
Reason: Quasimodo pattern & daily downtrendline.
ZFX Analyst’s Predictions
The Omicron virus that infected 100,000 Australians required the government to go into lockdown again. Essential workers are also infected with COVID, which disrupts supply chains and the macro economy. This will certainly hamper the economic recovery of the kangaroo country. Fundamentally, the Australian dollar is likely to weaken in the near term.
Meanwhile, Japan, which was hit by inflation problems, also continued to struggle to stabilize the value of the Yen. In Japan, wholesale inflation hit a record 9.0% in November on rising global commodity costs, core consumer inflation at just 0.5% in part due to the consumption hit from the coronavirus pandemic. BOJ Governor Haruhiko Kuroda also said that the central bank will keep monetary policy very loose until 2% inflation is achieved. So there is still no indication for the appreciation of the value of the Yen from a fundamental point of view. Now only technicals are giving hints of a decline in the value of AUDJPY in the near future.
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.
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