AUD Update

One of my major concerns currently is AUD and in particular AUDJPY. AUDJPY has been a benchmark for the carry trade over years and major turns in this pair have often coincided with major market tops. Currently, I think AUDJPY is breaking down through an ending wedge pattern and yesterday's close confirmed this pattern on the Daily. There is an interesting parallel scenario with the current setup and that in 2008. Please see the charts below.



AUDJPY Daily Current:

AUDJPY Daily 2008:

Both these patterns had ABC moves down into their respective low, both topped out in the 76.4 to 78.6 retrace area, and both showed strong bearish divergences coming into the high. Currently, 79.75 to 80 is a key short term support area. I do think this level will hold in the short term and we may see a good bounce to put out swing shorts. However, if this level does go I could see genuine weakness with strong implications for risk markets. Perhaps this move down we are seeing in equities will prove to be much more complex?

AUDUSD itself is breaking down out of a triangle pattern on the Daily. I have been monitoring this setup for a while and actually thought we would see a breakout to the upside. Yesterday close negated this and we have to be flexible enough to take the other side. Failed patterns are often the best trades. AUD has been building a range for many months- ranges precede major price moves. If the short term support at 98c goes then I think we will see a strong breakdown that has to be joined.

AUDUSD Daily:

In sum, AUD is at a very important juncture that needs to be watched. This has a huge read across for commodities and other risk assets. If 98c breaks to the downside, we should be joining the momentum for a longer swing to 94c and possible lower. Equally, breaks of 79.75/80 are bearish indeed.

Thanks
Austin