AUDJPY has been moving sideways on its 4-hour time frame, bouncing off support at 80.00 and resistance at 82.00. Support just held on the latest selloff, indicating that the pair might be on its way back to the top.
Stochastic is on the move up so price might follow suit. In addition, RSI is also making its way higher so further gains might be in the cards until these oscillators reach overbought levels.
However, the 100 SMA is below the 200 SMA so the path of least resistance might be to the downside. These moving averages are around the middle of the range at 81.00, which might hold as near-term resistance and lead to another test of support.
Earlier today, Chinese PMI readings came in weaker than expected, indicating a sharper pace of contraction for the manufacturing sector and a slower pace of growth for the non-manufacturing industry.
Still, the RBA decided to keep interest rates on hold at 2.00% and maintain its steady assessment of the Australian economy. This allowed AUDJPY to bounce off the support area, even as analysts downgraded their estimates for tomorrow’s GDP release to account for weaker company profits and industrial imports.
The Australian economy is slated to grow by 0.5% in Q4, slower than the previous 0.9% expansion. A weaker than expected reading could mean more losses for the Aussie and possibly a downside break of this AUDJPY range.
If that happens, the pair could be in for an additional 200-pip decline, which is roughly the same height as the chart formation. This could take AUDJPY down to the 78.00 level, closer to its lows so far this year.
On the other hand, an upside break from the 82.00 resistance could spur a rally of around 200 pips, taking AUDJPY to the 84.00 mark.
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