A good risk reward short entry for AUDJPY

3 янв. 2019 г.

A flash crash at the beginning of Asia's session on 4th January 2019. AUDJPY went down 7%. It recovers back almost to the point where the move started as the day goes by. Stock markets were generally negative. Yet we see recovery in AUDJPY price.

Shouldn't AUDJPY be a proxy to the market sentiment? Almost everything is negative, yet AUDJPY recovered. What happen?

Now let us look into the details of the causes:

1. Apple projecting lower revenue in Greater China in Q1. Factors blamed by the CEO: China's economic slowdown. Yet if we delve deeper, Apple's sales have weakened in last quarter. Competition and pricing are the main factor, and China's economic slowdown is more of the general factor, instead of the specific factor. And, if we look at the projected earning, it will be the highest for Apple. Not so bad after all.

2. Low liquidity, everyone is selling. Yet the general idea is, if one wants to sell, there must be offers to support the seller's order. The problem is, there is not enough offer to the down side. In other word, there is not enough liquidity for sellers to push the price lower and what happened? The initial sellers (most likely the algos) are dumping their positions and take profit, effectively creating demand orders (buyers) in the market.

Will AUDJPY continue its upward movement? The level that everyone should look at is 75.50-75.60 where the initial flash started.

This is the decision point where market will reassess the informations during and prior the flash.

Are the prevailing conditions support more AUDJPY strength?
- stock market
- liquidity

If yes, we will see AUDJPY strength until next info. If no, then we will see AUDJPY resumes it's weakness.