AUDJPY Forecast for 18th - 22nd November 2013

The AUDJPY seems to be obeying the ascending channel that I drew last week.

I opened a long position at the start of last week at 92.800, with my profit target at 95.400.Unfortunately, I prematurely took profit a few days ago so I'm out of this particular swing trade already. This was purely psychological. When I saw price retreating back to breakeven on Thursday, I decided to close and content myself with a tiny, nominal win. This was my ego sabotaging my trading. I'll continue to "paper trade" this particular price movement since I'm eager to see if I can successfully combine my fundamental and technical analysis.

WEEKLY FORECAST FOR 18th - 22nd November

News / Fundamentals

USD

Last week's major headlines for the USD were bearish, with the US trade gap widening to $41.8b versus a forecast of $38.7b, and unemployment claims jumping to 339k vs forecast of 331k. The US also posted bearish industrial numbers last Thursday and Friday. Future Federal Reserve boss Janet Yellen has also indicated the continuance of QE yesterday. 

These events should contribute to bullish pressure on the AUD, especially the AUDUSD. However, with the price of USD being driven down and Yellen's dovish tone on QE and tapering, the USD retains its attractiveness as an alternative carry trade currency to the JPY. I believe any influence on the AUDJPY will be subdued.

EUR

No major headlines that I can read. 

AUD

News releases on the AUD has been mixed. Consumer sentiment and home loans are up for the month, but business confidence has slid. I don't think these events will have lasting impact come next week.

JPY

Japanese quarter-to-quarter GDP growth came out better than expected, 0.5% versus a forecast of 0.4%. However, last month's current account deficit came in at -0.13T yen vs a forecast of -0.1T yen. Other industrial indicators are also down, so overall the news is mixed. News should provide little bias in either direction next week, in my opinion. The central bank will be releasing a statement on Nov 21, but I doubt that many traders will be sitting out before then - if there are any surprises, I think it'll be further monetary loosening than anticipated. So with regards to the AUDJPY, I think the JPY will provide neutral-to-bullish pressure. 

How this fits together

News verdict: I don't expect last week's events to influence the AUDJPY this upcoming week. Neutral. I expect technicals to play out their course.

Sentiment

OANDA's COT report indicates that shorts on both the AUD and JPY grew last week. JPY shorts are near their highest in the last 12 months, showing extreme bearishness. AUD bearishness is not so strong.

JPY

AUD

Sentiment verdict: moderately bullish

Technical Analysis

As illustrated at the start of this entry, it looks as if the AUDJPY has established an ascending channel after respecting support at 92.500. A pinbar formed off support, lending some technical strength to a bullish outlook. The range of Friday's candle was also large, relative to the five previous candles, suggesting a lack of profit taking from the bulls. All these signs point to the AUDJPY moving up next week.

Two major events are taking place next week: release of the RBA's minutes in its last meeting on Tuesday, and BoJ releasing a monetary policy statement on Thursday. I don't think there will be any surprises, so I think traders will stay in the market before and during these events. The RBA won't be making an interest rate decision until early December so there is at least another week for bulls to drive up the AUDJPY without RBA interference. 

Overall, I expect the AUDJPY to climb, but it will most likely encounter heavy resistance at 95.600 and beyond and turn, should it arrive at these levels next week. It will take some news to push through.