Technical Sentiment: Bearish
- Australia’s Consumer Confidence sees hefty decline;
- Yen maintains strength as BoJ leaves monetary policy unchanged;
- AUD/JPY starts running into major support levels.
AUD/JPY continued its sell-off for the 6th consecutive day as AUD Westpac Consumer Sentiment decreased a hefty 6.8%. Meanwhile the Bank of Japan left its monetary policy unchanged, as Governor Haruhiko Kuroda is confident that Japan will meet the bank’s 2% price target.
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AUD/JPY is currently trading around the 100-Day Moving Average, after hitting a low of 93.03 during the European session. The recent configuration of lower highs and lower lows depicts a bearish trend and sentiment is skewed heavily towards the downside. Australian Consumer Inflation Expectations will be released later tonight together with Japan’s Flash Manufacturing PMI, yet the sentiment is not going to be affected based on these reports.
93.30 represented the first key support since the break of the bullish channel. A confluence of three Fibonacci Retracement levels backed up the 100-Day Moving Average, yet the market ignored this area thus far. A daily close below 93.30 will suggest AUD/JPY is heading for the 200-Day Moving Average, currently sitting at 92.77. Support extends as low as 92.37/51 (another Fibonacci confluence), but if price breaks below the 200-Day Moving Average the downtrend could accelerate severely toward 91.30 before bouncing back up.
Stochastic is entering oversold territory on the Daily time frame; consequently the bearish cycle should halt soon, allowing for a corrective rally to the resistance levels at 94.00-94.50 before the downtrend resumes.
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets