AUDJPY recently formed a double bottom pattern on its daily time frame to signal that a reversal from the selloff is underway.

Price just broke past the neckline around the 84.50 minor psychological level to confirm that bulls are charging. 

The chart pattern is approximately 300 pips tall so the resulting rally could be of the same size. However, stochastic is turning down from the overbought region to indicate a pickup in selling pressure. Also, the gap between the moving averages is narrowing to signal that sellers could regain the upper hand. 

There are no major reports lined up from the Australian economy today so any big moves could be spurred by changes in market sentiment and commodity prices. In particular, a surge in iron ore prices could prove bullish for the Australian currency.

Meanwhile, there are no major reports due from Japan as well so yen price action could hinge on US bond yields and risk sentiment. Keep in mind that it’s almost the end of the month and quarter so there could be a lot of profit-taking happening towards the end of the week. 

By Kate Curtis from Trader’s Way