AUDJPY May Offer the Best Setup For a Turn in Risk

[B]My picks:[/B] Pending AUDJPY Breakdown (short)
[B]Expertise:[/B] Combining Money Management and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week

Generally, there are to means for trading in current market conditions. On the one hand, you can take a passive approach and trade ranges while expecting false breaks and choppy price action. On the other, you can attempt to jump on breakouts and risk quick reversals if the market does not follow through. The former is more consistent, doesn’t require a market-wide move, yet levels can be difficult to put into a trade setup. On the other hand, the latter requires entry when the market is already moving and could open the door to wide stops should it be a false breakout. However, the latter has far greater profit potential. These were my considerations last week, when EURUSD looked to be entering the critical stages of a head and shoulders breakout. The world’s most liquid currency pair confirmed a close below a horizontal neckline; but after such an aggressive move into the break, this would end up loosing all momentum on the otherside of the barrier. A quick reversal would ultimately stop me out.

This week, I have to make the same decision: passive or aggressive. Considering the reveals last week, it would seem better to go for the former; but each week is a new week and each trade a new trade. This time around, I see the yen and dollar crosses positioning for a reversal in favor of these safe haven currencies. Considering this is taking place across the board, a genuine funamdental shift can carry greater clout and bigger moves. There are many opportunities out there; but AUDJPY seems to have the better setup. Once again, we have a head-and-shoulders formation, a notable Fib and long-term rising trendline falling around 75. A confirmed move below this level will be considered entry for me. However, I will be critical of a move that occurs today (as we have already seen an aggressive decline through the day). A conservative stop would be set above Friday’s high; but we can develop a smaller one through short-term technicals. There is plenty of unencumbered running room for targets to the downside. The first target will equal risk and the second will be set above the April 28th swing low around 68.25.