Technical Sentiment: Bullish

Key Takeaways

• Yen is weakening across the board against most major pairs;
• AUD/JPY, within several pips of Daily resistance, does not seem to be backing down yet;
• A bullish break could expand the limits of the trading range.

Buyers appear reluctant to release AUD/JPY from their stronghold, lifting the pair yet again after yesterday’s resistance test. Despite overbought conditions, a bullish break seems very likely in the near future.

Technical Analysis

Less than two weeks ago AUD/JPY was looking progressively bearish, just one signal away from confirming a long term downtrend, until the sell-off quickly reversed near the 200-Day Simple Moving Average with a Bullish Pin Bar. Since then it has been a buyers’ market with practically zero corrections from bottom to the current top. Stochastic shows overbought conditions on both 4H and Daily time frames, indicating a top should form soon; however what this scenario lacks is price action confirmation.

Hopefully Thursday’s Daily close will offer a few clues concerning this interesting predicament. Lacking any major economic triggers directly affecting AUD/JPY, technical traders have the upper hand for now. A daily close above 96.50 confirms intentions for a Higher High to be priced in. 97.40/60 is the first candidate for a HH, although bullish potential extends even further up, towards 98.80 and ultimately 100.00 for long term targets.

If AUD/JPY fails to close above 96.50 on Thursday or Friday, preferably aided by a large bearish price action signal, we can begin aiming for the nearest support levels. Between 95.30 and 95.50, the 50-Day and 100-Day Moving Averages caused a temporary pause in the uptrend, so we can expect this area to be a strong attraction point for sellers on the way down.

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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets