Chart of the day AUDJPY faces further potential short term downside

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By :  ,  Financial Analyst

In light of rising geopolitical risk caused by the on-going tensions between U.S. and North Korea, higher yielding currencies against the safe have JPY tend to have significant movements. Let’s us take a look at the AUD/JPY cross pair from a technical analysis perspective.

Short-term technical outlook on AUD/JPY

Key technical elements

  • Since its low of 72.53 printed on 24 June 2016, the AUD/JPY cross pair has been trading within a bearish “Ascending Wedge” configuration where it has staged a retreat below the medium-term resistance of 89.45 (upper boundary of the “Ascending Wedge” (see daily chart).
  • The daily RSI oscillator has exited from its overbought region and broke below a corresponding trendline support. It shows further potential downside before it reaches an extreme oversold level of 21%. These observations suggest that the downside momentum of price action remains intact and the AUD/JPY may see a further decline to test the lower boundary (support) of the aforementioned “Ascending Wedge” at 84.40 in the medium-term (1 to 3 weeks).
  • In the shorter-term, the AUD/JPY is now evolving within a bearish descending channel in place since 27 July 2017 high. Yesterday’s rebound in price action from the 86.27 minor low has taken the form of a bearish continuation pattern called “bearish flag”. The upper boundary of the “flag” confluences with the upper boundary (resistance) of the aforementioned descending channel at 87.40 (see 1 hour chart).
  • The key short-term support rests at the 85.90/65 zone which is defined by the lower boundary of the short-term descending channel, a Fibonacci cluster and the minor swing low areas of 05 July/07 July 2018.

Key levels (1 to 3 days)

Intermediate resistance: 87.10

Pivot (key resistance): 87.40

Supports: 86.27 & 85.90/65

Next resistance: 88.00


Therefore as long as the 87.10 pivotal resistance is not surpassed, the AUD/JPY is likely to stage another potential bearish impulsive downleg to retest the intermediate support of 86.27 before targeting the next support at 85.90/65.

However, a clearance above 87.10 may invalidate the preferred bearish bias for an extension of the corrective rally towards the next resistance at 88.00 (minor swing high areas of 04 Aug/07 Aug 2017) in the first step.

Charts are from eSignal


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