Buy AUD/JPY Ahead of BoJ

The Bank of Japan today conclude’s a two day meeting. Markets are expecting a commitment to a 2% inflation target (up from 1%) and further measures to stimulate the Japanese economy through a weaker Yen. (For a full discussion of BoJ expectations please see Ric’s blog from today). The potential for a weker Yen has some traders adding to longs in AUD/JPY.

AUD/JPY Daily

20130122 audjpy wkly

The uptrend following the channel break is clearly in place. While more technically based traders may wait for a pull back to the trend line, or a breach of the recent high at 95.03, the potential for a move today is strong enough mtivation for me to join the trend now. Why am I so keen to get long AUD/JPY?

AUD/JPY Weekly

20130122 audjpy mthly

The “Big Picture” tells the story. AUD/JPY has broken from its 4 year trading range. IMO this is signalling a test of the 104 to 107 area, that is 10 to 13 big figures higher!! This is extremely unlikely to  occur in hours or days – more like weeks or months. Nonetheless, a powerful, long term trend is a trader’s friend.

That’s why I’m looking at the following trade, with a trailing stop-loss:

20130122 audjpy tkt

About michaelmccarthycmc

Chief Market Strategist - CMC Markets and Stockbroking Regular on ABC, BBC, Bloomberg, Channel TEN, CNBC, SBS and SKY
This entry was posted in Forex, Trading and tagged , , , , , , . Bookmark the permalink.

5 Responses to Buy AUD/JPY Ahead of BoJ

  1. Peter Lyttle says:

    Hi Michael, just a thought and observation. As an experienced nubie I have always noticed that the market (any market) does not like gaps. Gaps seem to be filled, sooner or later. At the xmas break, Nikkei, USDJPY and EURJPY (and maybe others) all gapped up and have not been filled. AUDJPY also gapped, but had recently traded the gap range, so I consider the gap filled. What are your thoughts on the market doing a quick retreat to fill these gaps before going higher?

  2. Chris says:

    Peter,

    According to a talk I saw given by one of the original Turtles (Russell Sands) a gap in the direction of the trend will generally not be filled, and is approx 3 times the size of a gap against the trend.

    Chris

    • Peter Lyttle says:

      Thanks Chris,
      What you have written makes sense. There must be a reasonable limit whereby the market won’t look back. But as we know the market does what it wants when its wants and will continue to confound us all. I know we shouldn’t believe all we read, however it is reported in some circles that “one US house” expects a dip to 86.5, 85 is not that far away, if only a momentary dip. Interestingly, a level of 85 is close to a 38% retracement from the recent high to the swing low of 77.15ish on 13.9.12. No amount of logic or technical analysis will ever explain the gap phenomenom. I’ll stick to my guns and watch. (My better trades have all involved waiting for a gap fill)

  3. Steve says:

    I just noticed the USD/JPY and AUD/JPY has similar pattern on daily chart. On the weekly and daily chart, they both turned down, out of overbought area on both CCI and Stoch indicator. I then check the hourly chart, they both entered or near the oversold area. According to the textbook, it seems a good opportunity to sell in short term, when 2 or 3 time frames give the same signals.

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