AUDJPY has been trending lower, moving inside a descending channel on its 4-hour chart. Price just came off a test of resistance and appears to be aiming for the bottom at 79.50.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is set to carry on. However, stochastic is moving up, indicating that buyers are gaining ground. RSI is also heading north so price might follow suit.
In that case, another test of the channel resistance at 81-81.50 might take place, as this lines up with the moving averages, which might serve as dynamic inflection points. Price appears to be finding support at the mid-channel area of interest at the moment.
A break below the 80.50 mark could indicate a return in selling pressure, likely enough to take AUDJPY to the bottom of the range. Stronger bearish momentum might even trigger a downside break, putting the pair on a sharper downtrend.
Risk aversion has weighed on the Aussie’s rallies recently, as crude oil prices tumbled. This was a result of Iran’s and Saudi Arabia’s reluctance to curb production, reminding traders that oversupply concerns are still present. US crude oil inventories are due today and an increase of 2.1 million barrels is eyed.
Earlier in the day, Australia printed a couple of weaker than expected quarterly reports. Both construction work done and the wage price index for Q4 2015 fell short of consensus, reflecting weak spots in the economy.
As for the Japanese yen, the currency continues to take advantage of safe-haven demand, spurred by the outflow of money to Europe into Asia on Brexit concerns. A continuation of risk aversion in the markets could keep the AUDJPY downtrend intact, although profit-taking might take place before the end of the week.
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