AUDJPY recently broke below its range support at 78.50 and fell to a low of 75.55. From there, price showed signs of a pullback and might draw resistance from the area of interest.
Using the Fib tool on the latest swing high and low shows that the broken range support is in between the 50% to 61.8% levels, any of which might keep gains in check. The 61.8% Fib is closer to the 100 SMA, which might also hold as dynamic resistance.
Speaking of moving averages, the 100 SMA is below the 200 SMA so the path of least resistance is to the downside. However, the gap between the two is narrowing so an upward crossover might be possible. If so, bullish pressure could get stronger and push AUDJPY back inside the range.
Stochastic is on the move down, indicating that buyers are taking it easy and letting sellers regain control. In that case, AUDJPY could resume its drop to the previous lows or create new ones. RSI appears to be turning down but is still on the move up so bulls might have enough energy to push for a higher correction.
Earlier today the RBA minutes led to a bit of a boost, as the transcript of the meeting wasn’t as dovish as expected. Their actual announcement was also considered neutral since the central bank refrained from cutting rates or jawboning the Aussie.
Meanwhile, the yen appears to be recouping its losses after the BOJ intervention rumors fizzled. Recall that the currency lost ground late last week when government officials cautioned about significant and sharp rallies for the currency but it appears as though they aren’t ready to step in the currency market yet.
Moving forward, the EU referendum could pose the biggest event risk for this setup as the outcome could affect overall market sentiment. A vote to stay in the EU could bring risk-taking back and allow higher-yielding currencies to advance.