AUD/JPY has been in a strong uptrend since early February. Since then the pair has completed three impulsive waves, respecting the boundaries of the current bullish channel all too well.
A deeper pull back within the channel, to test the support and form a higher low in the uptrend configuration, has been signaled on Friday when price formed a Pin bar candlestick pattern. This bearish price action pattern formed following the touch of 96.50 and the channel resistance. Daily stochastic is in overbought territory, so this retracement is very much due at this point.
On the 4H timeframe price is approaching the 50 Simple Moving Average at 95.38. This is the first minor support, where the drop can stall until later today when the NBA Business Confidence report is released together with Bank of Japan Monetary Policy statement.
Below 95.38, the bearish move should target the 94.50 pivot zone and 38.2% Fibonacci retracement for the 91.29 – 96.50 impulsive wave. Further down 93.90-94.10 shows decent support confluence, yet the strongest confluence is located around 93.30, where Fibonacci retracement levels from all three impulsive waves converge. If AUD/JPY will correct all the way to the support of the channel in the next two weeks, 93.30 will end up being the main target.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
