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Short-Covering on AUD/JPY

Last week, amidst increasing global risk sentiments, the AUD/JPY is one of those currency pairs that was a strong sell from a sentimental and fundamental point of view. The latter, however, is still intact whilst the former is shifting – albeit short-term – on this note, we can look to structure a long-position on the back of a possible a “short cover” – a trading scenario where short-sellers looking to book profit (most times temporarily).

Technically, price is showing short-term selling exhaustion as an inverse “Head and Shoulders” reversal pattern has currently printed on the 15-minute chart. The pattern is currently being validated as the price is trading above the neckline (highlighted in brown dashed-lines) [see m15 Chart], should price continue to trade above this level, this further opens room for a further push to the upside, at least on the short term.

Fig 1: 15-Minute (m15) AUD/JPY Chart

AUD/JPY Buy @ current market price (instant execution) Stop: 75.060 Limit: 75.700

Conversely, from a fundamental vantage point, the AUD/JPY is still solidly bearish and that’s puts the above outlook in a “watch closely and monitor” mode as the setup is largely contrarian. Hence, we advise that clients always use a stop-loss.

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