AUDJPY has been trending lower although a pullback is materializing lately. Price is retreating to the Fib levels marked on the 4-hour time frame and the one closest to the falling trend line at 83.00 might hold as resistance.
The 38.2% Fib is located at the 81.00 handle, the 50% Fib is at the 82.00 mark, and the 61.8% Fib is near 83.00. For now, the pair is testing the 50% Fib and a higher pullback to the actual descending trend line is still a possibility.
This trend line is also near the 200 SMA dynamic resistance. The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to carry on.
Also, stochastic is indicating overbought conditions, which means that selling pressure could return soon. RSI is still on the move up, hinting that a higher pullback could still take place. Once both oscillators turn from the overbought region, more bearish momentum could be seen.
If that happens, AUDJPY could make its way back down to the previous lows near 77.50. Stronger selling pressure could even lead to a break lower and a prolonged downtrend.
Earlier today the RBA minutes confirmed that policymakers are keeping the door open for further rate cuts but this didn’t trigger a sharp AUD selloff since the scenario was already priced in. Instead, renewed risk appetite on the return of Chinese investors to the market after their Spring Festival holidays is allowing the pair to stay afloat.
Data from Japan has also been mostly weaker than expected, as the economy contracted 0.4% in Q4 and tertiary industry activity slumped. The industrial production report also suffered a downgrade, keeping investors wary that further BOJ easing might take place.
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