Technical Sentiment: Bearish

Key Takeaways

• Australian Home Loans declined -0.9%;
• RBA is becoming increasingly concerned about the housing market;
• AUD/JPY broke below the 200-Day Simple Moving Average;

The market is ready to see AUD/JPY at fresh monthly lows now that sellers managed to break through a major support cluster at 94.30.

As per our previous technical analysis, AUD/JPY tumbled below the 200-Day Simple Moving Average in early trading hours on Friday, 10^th October, pricing a fresh 5-month Low at 93.66. This event brings major changes to the technical landscape, since the long-term trend has officially changed to bearish. Consequently, all upside targets from scenarios that entail a bullish bounce have been drastically lowered, with 94.30 – 94.60 (200-Day SMA) becoming the new resistance.

AUD/JPY is trading around 93.95 several hours in the U.S. trading session. Selling pressure remains high at the moment and there are chances of a new intra-day low being reached before the trading week draws to an end. From this point forward, corrections will be seen as opportunities to sell the pair in anticipation of future sell-off accelerations.

Immediate support targets are located at 93.00/03 (21^st May low), followed by 92.25/50 (Fibonacci cluster). At the current pace, AUD/JPY should hit these targets very quickly. That being said, extreme oversold conditions should prompt sellers to take a step back at some point, allowing for a resistance re-test (94.30/60).

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