Technical Sentiment: Bearish
Key Takeaways
• AUD/JPY remains pressured towards the downside;
• Daily Bearish Engulfing Bar is activated;
• Pair eyes support levels from 94.45 down to 93.30.
After a small bounce off the 94.82 level, AUD/JPY has cleared stop losses below this level and consequently formed a Lower Low. A bearish continuation will lead the pair towards the support trendline of the 3-month bullish channel for starters, with the possibility of an even deeper retracement in May.
Technical Analysis
AUD/JPY formed a Bearish Engulfing Bar on Wednesday, at the same time confirming the support line at 94.82. On Thursday the price action bar was activated when price dropped below 94.82. The daily close below this level suggests more losses are next.
The pair is trading near the 200 Simple Moving Average on the 4H timeframe. Backed up by 7th March high and the 38.2% Fibonacci Retracement from 91.28 to 96.50; 94.45 represents the first support level to be tested. If the pair successfully crosses below the 200 SMA, the support trendline of the 3-month bullish channel and the 50-Day Moving Average – priced around 96.75 – will be the next target.
Towards the upside, due to Wednesday’s drop, AUD/JPY has to recover a lot of ground before it will be technically bullish again. The small top at 95.30, followed by the 50 and 100 Simple Moving Averages (94.45-95.55) on the 4H chart, represents the first resistance levels. Only above these levels AUD/JPY is likely to get rid of the current bearish pressure.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets