AUD/JPY – Topping Action vs. Flag Pattern

by Admin

Awards 2013

AUD/JPY 4H chart 4/1/2012 8:40AM EST


Topping?: The AUD/JPY has been consolidating since hitting the 100 handle. The 4H chart shows a market in a slight bearish channel correction. The moving averages are congested and price is starting to fall below many of them. But it remains above the 200-4H SMA and is also finding some support at a projected channel support in the 4/1 US session. The fact that price broke below a support pivot at 97.68 established topping action, which was in the form of a descending triangle. The RSI tagging 30 also reflects nascent bearish momentum. Holding below 98.00 and clearing below 97.00 will add to the bearish correction outlook.

The bearish outlook has a rising trendline from October as the next challenge. With that in mind, the bearish outlook should be limited to the very short-term.

Flag: The other interpretation, maybe from a higher degree time-frame, is a flag pattern. If you look at this correction channel relative to the longer term uptrend, since October 2012, then it could just be a minor correction that is already being completed. A break above 98.50 could neutralize the near-term bearish correction outlook and be an early sign of bullish continuation.