AUD/JPY Movement Dominates Market Sentiment
AUD/JPY About to Face Resistance on the Falling Trend Line
The Aussie has been kicking the yen’s butt on the charts for the past couple of days. This is pretty apparent on the 4-hour time frame in which connecting the most recent lower highs on AUD/JPY would result to the formation of a falling trend line.
Stochastic suggests that the down trend will remain to be intact. It indicates that the currency pair is already overbought. In fact, with the indicator making higher highs while price is making lower highs, we can see that there is a bearish divergence on the pair.
To top it off, price is currently testing resistance on the 100 SMA and 200 SMA. For those of you who do not know, traders consider these moving averages as strong trend indicators and reliable support or resistance. So, if the 100 SMA and 200 SMA hold, you can expect to see AUD/JPY drop down to its most recent low at the 94.00 major psychological handle.
Just be careful not to get too excited though. Note that price could still tick higher and test the area around the falling trend line. Who knows, a break above it, somewhere around 95.60 could mean that AUD/JPY would soon rally up above the 96.00 level.
EUR/JPY Downtrend to Stay Intact?
The euro just isn’t getting any love from the market. On the daily chart of EUR/JPY, we can clearly see that the currency pair is on a down trend. It has been making lower highs and lower lows since May 2014, forming what looks like a falling channel. Price has been trading within resistance at the top of the channel and bouncing off support at the bottom of it.
Right now, it’s trading in the middle of the channel. Stochastic hints that we could soon see the currency pair trade higher and test resistance at the top of the channel once again. So watch out for the area around the 138.00 psychological handle. A strong break above it would mean that EUR/JPY has already established a new monthly high and may invalidate its current trend.
On the other hand, failure to close above the trend line may signify that the currency pair would soon be on its way to test support at the bottom of the channel. If reversal candlesticks, in the form of dojis, materialize around 138.00, we may see a drop to 135.60 in the near future for EUR/JPY. If there are enough bears in the market, we may even see it trade all the way down to 132.00!
Bullish Divergence on the Rising Trend Line on EUR/AUD
Feeling bullish for the euro? Don’t worry. While Europe’s shared currency doesn’t look like it’s ready for a comeback against the yen soon, there are signs on EUR/AUD which hint that it may regain dominance on the charts.
Stochastic on the 4-hour time frame reveals that the currency pair may already be running out of bearish momentum with the lines already in the oversold region. In fact, the indicator is making lower lows while price is making higher lows, forming a bearish divergence.
The area where EUR/AUD is currently trading is also a strong area of interest. 1.4380 is the 50% Fibonacci retracement level from last week’s low to the swing high established on Friday. Secondly, it coincides perfectly with the rising trend line from which the currency pair has been finding resistance. Lastly, the 100 SMA also lines up perfectly with it!
A couple of reversal candlesticks have already materialized in the area, hinting that the bulls could be revving up for another run to last week’s higher at 1.4470. Watch out though! A bearish close below 1.4350 could mean that the bears are taking over the currency pair and could drag it down to last week’s low at 1.4280.