AUD/JPY - Analysis and trade setups

AUD/JPY – 9/20/23

As always, I initially begin my analysis process by noting any key economic events taking place for the pair within the coming days. This information could be key to understanding the movement of the charts on a deeper level.
- In the pair we’re analyzing today, we’ll see that we’re approaching a strong area of resistance that has failed multiple times on the weekly level – however, with key inflation data and reports coming out of Japan tomorrow we could use this information as a reason why we may be able to push out of this triangle and above our resistance zone.

1. HTF (Weekly & Daily) Analysis – Identifying key support and resistance levels and patterns on the Weekly and Daily time frames. This includes current trend and any recent CHoCH.
a. Identifying Trend: Looking at the HTF Charts, we see that we have been in a sustained Uptrend. However, after our most recent higher high (which mitigated our HTF supply zone (see below) we created a major CHoCH on the daily TF. We then failed to create a higher high and instead formed a double top at an already strong weekly level.
i. In order for price to continue its uptrend, it will need to create a higher high
ii. In order for price to reverse into a downtrend, it will need to create a HTF Break of structure.
b. Currently at a very strong weekly resistance level
c. Nearing zone of recent weekly double top and mitigated liquidity grab (which happened at the top trend line in a symmetrical triangle pattern)
d. Highlighted key support and resistance points in red and green to identify recent liquidity zones
i. One of these levels was a retrace of the current uptrend which has a massive wick and strong resistance at the 50% fib retracement, leading me to believe buyers are very much present and willing to attempt another break of resistance. Positive inflation news out of Japan tomorrow could be the catalyst to gain the necessary volume for such a push.
Having all this HTF information, I can now form a bias as to where I expect price to go long term. Using this bias, I would typically then switch to a middle or lower time frame to scout out key liquidity zones.
- In my trading strategy, it is enough for me to look to enter a trade if a MTF such as 4hr and 2hr liquidity zone is hit. However, if a HTF such as weekly and daily liquidity zone is hit, that puts a larger emphasis on the zone.
Since we saw a mitigation of a strong weekly supply zone, that would be our signal to switch over to a Middle Time Frame (MTF) such as 4Hr and 2Hr to look for key liquidity zones that we could use to find further liquidity. Only after this step would we move to the LTF of 15 and 5 minutes to look for an entry. If we looked for zone entries on the HTF, our stop loss would be too large.
In our case today however, since that weekly supply zone has already been mitigated and we missed our initially entry, we must look for MTF liquidity zones where price may want to go next (if trend and bias is still consistent) to then find LTF entries on.
2. MTF (2HR and 4HR) Analysis - As we move down to our middle time frames, we notice that the massive weekly supply zone created in 2013 was tapped for liquidity in Sept. 2022 emphasizing this resistance level and creating further qualifying supply zones for future sellers. This proved correct recently when this supply zone was retested and mitigated in June 2023 creating a double top and pushing price down to retracement levels up to 50%.
a. After identifying our MTF unmitigated Liquidity (supply and demand) zones, we have a better idea of where price may need to go in order to tab more liquidity.
i. For buyers, price will want to mitigate demand zones below in order to replenish liquidity from sellers.
ii. For sellers, price will want to mitigate supply zones above in order to replenish liquidity from buyers

The case for buyers:
Confluence:
1. HTF Bullish CHoCH
2. Strong bounce & Support off 50% retracement
3. HTF Uptrend
4. Unmitigated supply zone above

For a short term buying opportunity without requiring a break of a strong resistance level, price will want to mitigate the supply zone above in order to sustain a move downward toward a HTF BOS.
- In this case, we would look for a move up to the 96.500 psychological level. Since we are in a LTF (15 min) uptrend, for entry into this trade we would await a pullback to recent unmitigated demand zones below. Our stop loss would be below the zone and take profit 1 at next BOS with take profit 2 being our MTF Supply Zone above.
o This would yield us a roughly 3.62 R:R trade opportunity for TP1.
o This would yield a roughly 5.85 R:R trade opportunity for TP2.

The case for Sellers:
Confluence:
1. HTF resistance points: Weekly resistance, double top, and top of trend line (6 previous rejections)
2. HTF Bearish CHoCH
3. Unmitigated demand zones below

For a short term or long term selling opportunity we would need to see a failed retest and subsequent BOS to the downside with convincing volume. Without this, we could be stuck in a consolidation phase prior to an upside breakout.
- In this case, since we just bounced off the weekly resistance with strong volume, we will now look for a LTF CHoCH, identify the LTF supply zone that caused it, and look for an entry with a reentry into that zone. Our stop loss would be above the zone and TP1 at our next BOS. Take profit 2 would be our unmitigated demand zone below
o This would yield us a roughly 3.63 R:R for TP1.
o This would yield us a roughly 9.63 R:R for TP2.

As always, this can go any which way and we need to hold off on trading until the reaction and settling of inflation data tomorrow.

Happy Trading 😊