(Chart courtesy of FX Solutions' FX AccuCharts. Uptrend lines in green; horizontal support/resistance line in yellow; Fibonacci retracement levels in grey.)

3/21/2008 – AUD/JPY – A key carry-traded currency pair, AUD/JPY (the long-term weekly chart of which is shown) has just reached a critical support level. As the accompanying long-term chart displays, price action has been entrenched within a relatively well-established uptrend channel since at least mid-2004. With the exception of two accelerated bullish runs above the top line of the channel, price has consistently been confined within the borders of this parallel channel, as outlined on the chart by the two green uptrend lines. Within the past week, the pair once again reached support and turned back up at the bottom of the channel, attesting to the strength of this support. Therefore, any true breakdown of the bottom line of this channel would represent a considerable breakout shorting opportunity. In this event, the next major support to the downside would reside around the 86.00 region. At the same time, however, since the current uptrend support line carries considerable long-term strength and significance, the technicals are biased towards a near-term turn back up to resume the long-standing uptrend. In this event, the next major resistance to the upside resides at the key 38.2% Fibonacci retracement level around 93.00 (the high-to-low retracement span being measured from the most recent touch of the top of the channel on 2/28/2008 to the most recent touch of the bottom of the channel this week).

James Chen

Chief Technical Analyst

FX Solutions

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