AUD/JPY Set for Dramatic Reversal.The AUD/JPY pair has reached a critical juncture, touching the upper boundary of a well-defined ascending channel. This marks a pivotal moment for traders, as the pair's price action suggests a potential reversal, supported by multiple technical indicators.
50-day EMA: Bullish, indicating medium-term upward momentum.
200-day EMA: Bullish, confirming a long-term upward trend.
Hull Moving Average (9): Shows a sell signal, suggesting short-term bearish pressure.
Relative Strength Index (RSI 14): At 67.049, approaching overbought territory but not yet overextended. This suggests a potential for further upward movement but warrants caution.
Stochastic Oscillator: At 84.005, indicating overbought conditions, which could precede a price correction.
MACD Level (12, 26): Shows a buy signal with the MACD line above the signal line, but a bearish cross may form soon, hinting at potential downward pressure.
Volume and Price Action:
Increased trading volume has accompanied the recent price surge, typically a bullish sign. However, the volume spikes near resistance levels could indicate distribution before a potential sell-off.
The price has formed a series of higher highs and higher lows within the ascending channel, reinforcing the bullish trend.
The price is above the Ichimoku cloud, which is a strong bullish signal. However, it’s approaching the cloud’s edge, indicating a possible reversal if it re-enters the cloud.
Bearish Signals:
The channel top coincides with a bearish divergence on the RSI and MACD, suggesting weakening bullish momentum.
The MACD is on the verge of a bearish crossover, which, if confirmed, could accelerate a downward move.
Strong support levels at the 50-day and 200-day EMAs provide a safety net for bulls.
The overall long-term trend remains upward, as confirmed by the 200-day EMA and the ascending channel.
Short Position:
Given the confluence of bearish signals at the channel top, a short position could be initiated:
Entry Point: 104.00
Initial Target: 102.65 (Channel midline)
Extended Target: 101.00 (Channel bottom and major support level)
Stop Loss: 104.70 (Above recent highs and outside the upper channel boundary)
Long Position:
If the price action shows resilience and breaks above the channel decisively, consider a long position:
Entry Point: Above 104.50 (Confirmation of breakout)
Initial Target: 105.40 (Next resistance level)
Extended Target: 106.50 (Fibonacci extension and psychological level)
Stop Loss: 103.70 (Below recent support and inside the channel)
Short Now: If the price fails to break above 104.20 in the next trading sessions, confirming the resistance at the channel top.
Long Later: If the price sustains above 104.50 with strong volume and bullish confirmation from oscillators turning up from oversold conditions.
AUD/JPY is at a critical point where a short-term correction is likely before any significant bullish continuation. Traders should watch for confirmation of the bearish signals before shorting and be prepared to switch to a long position if a breakout occurs. Risk management with appropriate stop losses is essential given the current volatility and mixed signals.
