It can be beneficial to take a step backwards and look at the overall picture. The weekly chart shows some strong resistance at .9400 and a more recent bullish trendline coming in around .8800. I’d expect these parameters to hold for the next few weeks and playing as close to the edges as possible seems like a sensible strategy.

AUD/JPY is 1.5% higher on the day but a quick look at the daily chart shows us that this pair is still roughly in the middle of a consolidative wedge pattern with parameters at 73.50 and 78.50. Having stalled at a major 61.8% level at 88.00 and then initiated a downtrend, this wedge pattern is expected to break lower rather than higher over the next few weeks. The bearish long term MAs would also suggest more downside.

The previous low at 107.30 had the potential to act as a strong resistance level but that has now been negated by the solid consolidation above there.

Next major technical resistance in EUR/JPY is 109.00, which is also a previous low and the 38.2% retracement of 114.70/105.50.

The bottom of the consolidative wedge pattern comes in around 73.40 and a clean break below there, and especially below 72.60, will confirm that the downtrend is back in control. Shorts definitely preferred on a medium term basis but I prefer to wait for the break lower or else sell rallies.

AUD/JPY is currently testing hourly support at 75.40. The next level below here is a daily low at 74.60.

Japanese investors tend to be long AUD/JPY and the question now is whether the hung parliament here in Australia is likely to frighten them out of their carry-trades. As can be seen on the attached daily chart, the pair is in a medium term consolidation between 73.25/78.75 and we are close to the middle of this range at the moment.

• EUR/USD has significant technical support at 1.2735 and I suspect that there will be a lot of stop-loss sell orders parked just below there
• Cable has seen a lot of buying by Sovereign names around the 200-day MA which is at 1.5481 today. Once again we can expect to see lots of stop-loss sell orders below this level.

I’m sure lots of you have been watching the EUR/GBP hourly chart which topped out twice at .8282 and has now turned lower. The neckline is at .8247 which has been the high today. Selling rallies for a re-test of .8165 looks like a sensible short-term strategy.

The technical support levels I outlined earlier this morning at 1.2735/40 held beautifully and buying dips will now be the technicians trade of choice. At least you know where to put the stop!

• The trendline drawn from 1.1875 through 1.2150 comes in around 1.2740
• The 50% retracement of 1.2150/1.3330 is at 1.2740
• The daily low from July 21st is at 1.2735

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