From the desk of Tom Bruni @BruniCharting
Although most market participants are fixated on the gyrating US equity markets or Italian bond yields, two trade setups have formed elsewhere in the currency markets.
AUD/JPY has been forming a rounding top over the last 1.5 years and is sitting below a downward sloping 200-day moving average with momentum in a bearish range. Prices are consolidating within a bear pennant below support at 84.15 and a downside break from this consolidation would signal further downside with an initial price target of 75.75 (the 2016 closing low) and a secondary target of 72.55 (the 2016 intraday low). Below 84.15 we can be short, but above that level a neutral approach is best.
Click on chart to enlarge view.
GBP/JPY has formed a similar pattern since early 2017 and is breaking below the uptrend line from its April 2017 lows. As long as prices are below former support at 150.55, the bias remains to the downside. For risk management purposes we only want to be short below this broken uptrend line and early May low (147.50) and look to be taking profits at the 2017 lows near 136, with a secondary target at the 2016 closing lows near 125.50.
The Bottom Line: When looking for potential profit opportunities, it can make sense to look where the attention isn’t. Many are currently focused on other areas of the market like interest rates and the US Dollar but we’re not here to be popular, we’re here to make money. These short setups in both AUD/JPY and GBP/JPY present an asymmetric reward/risk opportunity where the risk is well-defined, so we want to be involved as long as the levels noted above remain intact.