In today’s’ analysis, we will observer the AUD/JPY currency pair which shows a strong bullish pattern. Currently, the pair seems to be getting ready for yet another bull run, which might happen very soon So, let’s observe multiple timeframes to get the big picture on the price action and deeper understanding of when and where the price is likely to move with the highest probability.
Above is a Daily chart where we clearly see each wave produced by the AUD/JPY during the past month. The first and most obvious pattern in the market movement in accordance with the Elliot Wave theory. There could be two scenarios, that it is either an ABC correctional phase up, or it is a major trend with a 5 waves pattern.
AUD/JPY broke above the first downtrend trendline. We have used a corrective wave down after the breakout to apply the Fibonacci retracement indicator. The price broke above the first resistance at 127.2% Fibs, which is 68.50 level. Not only it broke Fib resistance, but also a second downtrend trendline while producing the 3rd wave to the upside.
The most recent correction has resulted in a double re-test of the previous resistance area near 67.74, where the double bottom was formed. Obviously, now this area is acting as the support and it is holding pretty strong. Therefore, as long as price remains above 67.29, price should be expected to move up, potentially producing a final, 5th wave to the upside. In regards to targets, we have two resistance levels which should be monitored. First is the 71.28, confirmed by two Fibonacci retracement levels, 227.2%, and 78.6% Fibs applied to February – March trend down. It makes 71.29 a key resistance in the medium to long term price perspective, not to mention that it also corresponds with the 200 Exponential Moving Average. Although if it will get broken, with a clean daily close above, AUD/JPY is highly likely to test 327.2% Fibs at 74.09, which also corresponds to the long term downtrend trendline.
Moving on to the 6H chart, we can see that AUD/JPY could have completed an ABC correction down, where it rejected the 200 EMA along with the 38.2% Fibonacci retracement level. This is yet another confirmation that the trend remains bullish, and very soon we might see price climbing up quite fast.
On the 3H chart, it is more clear how important is the 67.58 support level. Previously it was acting as resistance and rejected for few times, then it got broken and became the support, which was rejected multiple times. Another key factor to consider for bulls is the most recent break above the downtrend trendline, which might be the trigger for a long entry on AUD/JPY, for the medium and long term traders. It is also interesting that the average price uptrend trendline corresponds with the first upside target, which could be reached as soon as the beginning of the next week.
On the 1H chart, the price broke above the descending channel. Currently, AUD/JPY is trading within the ascending channel, although spikes above the upper trendline were already produced. At the same time, the RSI oscillator broke above the downtrend trendline and still remains above the uptrend trendline. It is possible that RSI will re-test the uptrend trendline, in which case a small corrective move down on AUD/JPY could be expected.
Finally, in our smallest timeframe, we can see the potential pullback and where might be the best entry point for anyone who considers buying AUD/JPY. The uptrend trendline has been rejected together with the 61.8% Fibonacci retracement level at 68.45. Prior to that, there was a very clean bounce off yet another 61.8% Fibs applied to the previous wave up. Combining two Fibonacci retracement indicators we can see that strong support is located at 68.20 area, where 88.2% and 23.6% Fibs are based. This is the reason a correctional move towards this price area can not be ignored. But all-in-all, price action is very bullish, and AUD/JPY could start rising without any sort of retracement.
Based on the Elliot Wave theory, AUD/JPY could be getting ready to produce a final wave to the upside, which can be very fast and strong. This is because of the breakout above the descending channel as well as the downtrend trendline, not to mention multiple bounced off multiple Fibonacci retracement levels and huge market volatility.
There are two key resistance levels that can be used as an upside target. First is 71.29 level, which corresponds with 2 Fib levels as well as the 200 EMA. The second target is at 74.09, which corresponds with 1 Fibonacci resistance and the long term downtrend trendline.
Probability of a downtrend
Unless we’ll see a daily break and close below 67.29 the downtrend should not be expected. But as soon as this scenario will become the reality, bullish outlook will be completely invalidated and the price is expected to either establish a strong downtrend or enter an extended volatile consolidation phase.
Support: 67.74, 67.29
Resistance: 71.29, 74.09