AUDJPY Forex Forecast – Ready for a Downtrend Reversal?


AUDJPY has been selling off recently but price failed in its last two attempts to break below the 76.00-76.50 area, creating a double bottom. Price has yet to test the neckline of the formation at 78.50 before confirming that an uptrend is underway.

On the 4-hour time frame, the 100 SMA is still below the longer-term 200 SMA so the path of least resistance is still to the downside. This suggests that the near-term resistance could still hold and push AUDJPY back to the bottom at 76.50. On the other hand, a break past the neckline could send price up by 200 pips or the same height as the chart formation.

For now, the 200 SMA appears to be holding as a dynamic resistance level. RSI is indicating overbought conditions but hasn’t turned lower, which means that buyers are already exhausted but sellers haven’t taken over. Similarly stochastic is in the overbought region but has yet to show the presence of bearish momentum.

Earlier today Australia reported weaker than expected private capital expenditure and retail sales data. The former showed a 5.4% decline for Q2 while the latter printed a flat reading instead of the estimated 0.3% gain for July, both reflecting weak spending activity among businesses and consumers.

However, the Aussie managed to get a boost from upbeat Chinese PMI data, as the official figure climbed from 49.9 to 50.4 to show a return to industry growth. The Caixin version of the report also reflected industry expansion but at a slower pace.

Meanwhile, data from Japan was weaker than expected once more, reinforcing the view that the Bank of Japan would ramp up its easing program when policymakers meet later this month. In his Jackson Hole Symposium speech, BOJ Governor Kuroda highlighted the weak inflation outlook as one of the primary reasons why the central bank needs to dole out more stimulus.

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.