AUD/JPY Potential Bull Flag Within a Bullish Channel

The short term technical picture for AUD/JPY looks increasingly bullish as the pair seems to be consolidating in a bull flag pattern within an upwards parallel channel. The pair has been trading in a bullish channel for the past week (as seen below on the hourly charts). It has recently tested channel support which is just above the 55-hour SMA. Additionally, the 38.2% Fibonacci retracement of the recent rally (from the 74.65 test of channel support to the 76.80 test of channel resistance) comes in just under the 76.00 figure to provide added support. AUD/JPY now faces near term resistance in the area of the 21-hour SMA and top of the short term bull flag, however the bias remains to the upside. The hourly RSI indicator broke above a trendline resistance suggesting the prices may soon follow. While the pair remains in the bullish channel, we favor a long position with an initial target around the 77.25 zone ahead of the 78.00 figure (the 100% projection of the height of the flag pole). A sustained break below the 55-hour SMA which is currently around the 75.80/85 zone would negate our upwards bias and provides a decent risk-to-reward ratio.