By: Mike Kulej
The Australian Dollar, one of the strongest currencies this year, has been losing some of its luster. For a few weeks now, the Aussie has been quietly drifting lower. No sharp selloff, more like a wide consolidation, but its crosses are no longer making new highs, in fact they are testing latest lows.
In case of the AUD/JPY, that low is just under 84.50, established in early May. The priced ran up 88.10, but is now right back at the support level. What makes this particular support even more important is that it also had acted as a resistance back in February. This increases the significance of an eventual breakout.
If the AUD/JPY closes under this support, it could fall much lower. There is no other support all the way to 74.50. While it is difficult to come up with a reason for such severe sell off, a few hundred pips move is very possible, especially if confirmed by the Three Line Break chart plotted below.
The AUD/JPY is locked in a triangle, approaching its apex, so a breakout should happen soon. The chart favors a bearish conclusion, but if the price finds new support at 84.50, this might lead to another rally. Chances are good for a large move to start this week.