AUD/JPY 4H Chart 9:15AM EDT 7/31/2012
The AUD/JPY has been rallying sharply from the 89.50 area, now testing 82.45, which is a range resistance seen in the 4H chart. We can see that the market is slowing down here as the 4H RSI shows a bearish divergence.
The 1H RSI also shows an extended bearish divergence. Price action has anchored out of a rising trendline, only as a sign of slowing down, yet to show reversal. A break below the 81.70 pivot should represent topping and introduce a reversion-back-to-the-mean type of scenario.
The 1H RSI breaking below 40 would also be a sign that the bullish momentum is lost.
In this scenario, we are looking for a return toward the middle of a range. A 50% retracement of the latest upswing from range support to resistance targets the 81.00 handle. If you are conservative on the bearish outlook since the AUD/JPY was bullish before entering this range, the 200-Hour SMA at 81.25 could be a closer target in the very short-term.
AUD/JPY 1H Chart 9:17AM EDT 7/31/2012
Fan Yang CMT is a trader, educator and a Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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