The AUDJPY has traded higher over the past few months and formed a bullish price channel as visible in this D1 chart. This currency pair has reached the top of its chart formation and over the past six trading sessions this pair has attempted to form a top. We believe this forex pair will correct down to its ascending support line which is enforced by its ascending 50 DMA.
MACD has not confirmed the bullish price channel and formed a negative divergence as momentum fades away. RSI has formed a negative divergence as well and currently trades in overbought territory after it broke down from extreme levels. A further break down from overbought levels should assist the correction.
We recommend a short position at 99.40 with a potential second entry level at 100.40. We also advise traders to place a stop buy order at 99.90.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 100.00. We do not use stop loss orders and will execute this trade as recommended. Place your take profit level at 98.50.
Here are our reasons why we believe this currency pair will correct
- Price action at top of current chart pattern
- Chart pattern has not been violated since it formed
- Price action tried to form a top over the past six trading days
- MACD formed a negative divergence
- RSI formed a negative divergence
- RSI trades in overbought territory
- RSI has broken down from extreme overbought territory
- Profit taking
