Post Holiday AUDJPY Strategy

Though trading is probably going to be thin until we get into January I think it's a good time to consider trading strategy.

In the short term I expect the following:

• A test of the long term resistance line showing up on the daily charts from around October 14th until now. This could take place around 62.10 to 62.20 depending on how long it is before the test happens.
• I'm not sure it will happen, but we may then get a pull back towards the long term support daily support line.
• If we do pull back for another test of recent bottoms I expect they will hold.

With these thoughts in mind I have the following strategy in mind:

• Whether or not we break out of the long term resistance line now or later it suggests an eventual bounce of up to 1800 pips.
• I am hoping to accumulate some positions between now and the new year as I expect this consolidation phase to break upwards.

Why I expect these things is that President-Elect Barack Obama is going to change things around fairly quickly once he takes office. We will probably see a return to the up-tick rule, possibly the elimination of leveraged short ETF's (Exchange Traded Funds), a large economic stimulation package, and various other related initiatives.

It's possible that we'll break downward. However, I think commodity prices have overshot their targets already. Major stimulus packages, money supply expansion, quantitative easing, policy changes and the return of appropriate regulation should cause an increase in risk appetite.

However, I am aware, as you should be, that I am very often too early. I see where things might go and expect them to go there, and while they may, it can often take a lot longer than I thought. Whatever happens, I expect the markets to buck like a bronco and make it very difficult to enact any plan with confidence.

UPDATE: It's just after 11:00am and it looks like we are moving towards a test of the resistance line mentioned above...