The AUD/JPY pair rose during the course of the day on Tuesday, and even broke above the 97 level again, as it did on Monday as well. The market certainly looks bullish, and we should see continued buying pressure in my opinion. I have drawn a 96.50 based line that I recognize as previous resistance, and now it appears that we are simply grinding away sideways above that level in order to build up enough pressure to go higher. With that being said, I believe that the market probably has been consolidating since the 94.50 level, meaning that we could project a move all the way up to the 98.50 level before the momentum stops.
In the meantime, it appears that we are trying to build up enough momentum to break out to the upside significantly. The fact that we have been relatively impulsive lately suggests that perhaps the market is simply taking a rest in the meantime, but it should continue to go higher. Another thing that adds credence to this particular setup is the fact that the AUD/NZD pair continues to go much higher, and shows that the Australian dollar is in fact strengthening overall in relation to other commodity currencies.
“Risk on, risk off.”
This pair is highly sensitive to the risk appetite around the world. After all, Australia is known for commodities, while the Japanese are known for safety of funds. With that, as the stock markets go higher, as well as commodity and risky currencies, this market goes higher as well. However, it obviously works in both directions so you have to be cognizant of what’s going on around the world.
There is nothing on this chart right now that suggests to me that we should be shorting this market. With that in mind, I am actually looking to buy off of a short-term pullback, as I believe that we will ultimately break out much higher. With that being said, I think that the next 150 pips or so should favor the Australian dollar.