AUDJPY can be getting ready for a possible rally higher. In the 1 hour chart below, it is visible that the pair found a bottom/support at the Demand Zone signalling the proposed wave 2 has terminated. The pair was in correction lower from the July 23 2021 impulse wave 1. The correction lower was in a 7 swing sequence and we at EWF always advise traders that corrections are always in a 3, 7, 11 etc. swing sequence. What is also clearly visible is the pair bounced higher and broke above the downward channel upper line and most importantly broke above the previous LH (Lower High) signalling the 7 swing sequence is over. A bullish divergence pattern also formed at the August 3 2021 low signalling a trend reversal of the correction move lower. From the demand zone the pair bounced higher in a 5 wave move forming a bullish impulse wave ((i)) and price is now pulling back looking for the termination of wave ((ii)). Since the August 3 2021 low the pair has reversed higher in a higher high/higher low sequence meaning the pair is in a uptrend. Traders should now wait for the wave ((ii)) to terminate and also watch for a possible bullish divergence pattern to form at the termination of the wave ((ii)). This bullish divergence pattern will signal a trend continuation which at the moment is in an up trend. More confirmation the pair will rally higher is when price breaks out and above the Ichimoku Cloud. A move above the cloud and above the wave ((i)) high will also signal wave ((ii)) has terminated and AUDJPY will push higher for the big wave ((iii)) of wave 3. A move below the invalidation level (wave 2 low) will cancel the proposed rally higher. Only time will tell what AUDJPY will do but for now we remain bullish.
AUDJPY 1 Hour Chart August 6 2021
Of course, like any strategy/technique, there will be times when the strategy/technique fails so proper money/risk management should always be used on every trade. Hope you enjoyed this article and follow me on social media for updates and questions> @AidanFX
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