This is a high-conviction short setup on AUD/JPY based on a powerful rejection pattern that has formed on the 4-hour chart. As you can see, the price spiked into the critical resistance zone between 95.00 and 95.55 but was immediately and forcefully rejected, leaving behind a long "Exhaustion Spike."
This is a classic sign of buyer exhaustion and seller dominance. It tells us that despite the recent rally, there is significant supply waiting at these higher levels. This price action provides a clear opportunity to short the pair in anticipation of a significant move down.
🏦 Fundamental Analysis
The fundamental backdrop provides a strong tailwind for this trade, with two key drivers:
1️⃣ Central Bank Divergence: The Reserve Bank of Australia (RBA) is in an easing cycle, having recently cut rates to 3.85% with more cuts expected. In stark contrast, the Bank of Japan (BoJ) is on a path of normalization, having already raised its rate to 0.50%. This divergence in monetary policy is structurally bearish for AUD/JPY.
2️⃣ Imminent Catalysts: This week is packed with event risk that is skewed to the downside for this pair. We have the RBA interest rate decision on Tuesday, July 8th, and the U.S. tariff deadline on Wednesday, July 9th. A dovish RBA or a "risk-off" move from the tariff news would likely accelerate the decline in AUD (a risk currency) and strengthen the JPY (a safe-haven currency).
📊 Technical Analysis
The price action on the chart confirms the bearish bias:
1️⃣ 4-Hour Rejection: The "Exhaustion Spike" at the 95.00 - 95.55 supply zone is the primary signal. It shows a clear failure by buyers and a strong takeover by sellers at a key level.
2️⃣ Long-Term Trend: On the daily chart, the price is trading below the critical 200-day moving average, confirming the long-term trend remains bearish.
3️⃣ Waning Momentum: There is a clear bearish divergence on the daily RSI. The price made a higher high, but the momentum indicator made a lower high, signaling that the rally is internally weak and losing steam.
📋 Trading Setup
This is a swing trade designed to capture a significant correction with a simple "set and forget" plan.
📉 Direction: SHORT / SELL
👉 Entry: Sell Limit @ 94.85
⛔️ Stop Loss:95.60
🎯 Take Profit:91.10
💡 Rationale: The entry is placed strategically to capitalize on a potential retest of the rejection area. The stop loss is placed safely above the rejection wick and the major resistance zone. The take profit targets the major structural support from the May 2025 lows, offering an excellent risk-to-reward ratio.
This is a classic sign of buyer exhaustion and seller dominance. It tells us that despite the recent rally, there is significant supply waiting at these higher levels. This price action provides a clear opportunity to short the pair in anticipation of a significant move down.
🏦 Fundamental Analysis
The fundamental backdrop provides a strong tailwind for this trade, with two key drivers:
1️⃣ Central Bank Divergence: The Reserve Bank of Australia (RBA) is in an easing cycle, having recently cut rates to 3.85% with more cuts expected. In stark contrast, the Bank of Japan (BoJ) is on a path of normalization, having already raised its rate to 0.50%. This divergence in monetary policy is structurally bearish for AUD/JPY.
2️⃣ Imminent Catalysts: This week is packed with event risk that is skewed to the downside for this pair. We have the RBA interest rate decision on Tuesday, July 8th, and the U.S. tariff deadline on Wednesday, July 9th. A dovish RBA or a "risk-off" move from the tariff news would likely accelerate the decline in AUD (a risk currency) and strengthen the JPY (a safe-haven currency).
📊 Technical Analysis
The price action on the chart confirms the bearish bias:
1️⃣ 4-Hour Rejection: The "Exhaustion Spike" at the 95.00 - 95.55 supply zone is the primary signal. It shows a clear failure by buyers and a strong takeover by sellers at a key level.
2️⃣ Long-Term Trend: On the daily chart, the price is trading below the critical 200-day moving average, confirming the long-term trend remains bearish.
3️⃣ Waning Momentum: There is a clear bearish divergence on the daily RSI. The price made a higher high, but the momentum indicator made a lower high, signaling that the rally is internally weak and losing steam.
📋 Trading Setup
This is a swing trade designed to capture a significant correction with a simple "set and forget" plan.
📉 Direction: SHORT / SELL
👉 Entry: Sell Limit @ 94.85
⛔️ Stop Loss:95.60
🎯 Take Profit:91.10
💡 Rationale: The entry is placed strategically to capitalize on a potential retest of the rejection area. The stop loss is placed safely above the rejection wick and the major resistance zone. The take profit targets the major structural support from the May 2025 lows, offering an excellent risk-to-reward ratio.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.