AUD/JPY Price Analysis: Bulls target daily resistance

The price has rallied from the structure in what could be an extended correction of at least  50% mean reversion of the recent bearish daily impulse. 

The following is a top-down analysis that illustrates where the next opportunity could arise in targeting the prior support of the M-formation on the daily chart.

Daily chart

The daily chart offers a bearish engulfing candlestick pattern as part of an overextended M-formation. 

While the bearish engulfing is a topping pattern, the M-formation would be expected to be completed once the price has retested the prior support, aka, new resistance. 

This offers an opportunity to target the nose of the M-formation from a lower time frame, such as the hourly chart as follows:

Hourly chart

Bulls have rallied to test the first key resistance.

Providing this level holds, an opportunity would arise for bulls to buy into the prospects of a correction of the bearish impulse on the daily time frame at a discount. 

If the price corrects to restest the new support structure, a buy limit would activate a long entry with a target towards a 50% mean reversion of the bearish impulse, protected with a stop loss below the recent lows. 

This would offer in the region of a 1:2 risk-reward opportunity.  

Thereafter, bears would seek to reengage and target a longer-term downside target below the recently made lows, extending the bearish impulse from the top of the bull rally.