AUDJPY, H4 and Dailly
In the past 2 days the biggest mover by far has been Aussie, which plummeted by over 1.3%. The losses were sparked by RBA Governor Lowe, who seemed to walk back his post-policy meeting statement of yesterday, which disappointed markets by failing to follow the Fed’s dovish turn. During a speech in Sydney earlier today, Lowe corrected this by stating that “over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities appear to be more evenly balanced.”
This chimed with the prevailing sentiment in Australian markets, where narratives are focused on the risks of a slowing Chinese economy, the recent depreciation of the Australian Dollar (Australian exports being largely priced in US Dollars), and tumbling property prices.
The Aussie Dollar is the day’s outperformer, registering a 1.3% advance vs the Greenback and a 1.8% rise against Yen.
The AUDJPY’s decisive southwards move today, away from 50-day SMA and into the lower daily Bollinger Bands pattern, raises expectations for a new sell off in the medium term. Overall, AUDJPY has been in a downchannel since September 2017, suggesting that any weak correction to the upside could give market participants sell opportunities.
The preservation of negative bias in the long term can be also confirmed by momentum indicators, with RSI continually sloping negatively below neutral zone, while on the other hand MACD posted a bearish cross in the medium term but a consolidation sign in the daily timeframe.
What we have seen in the past few days is a breach of Support at 1.5040 taking the market to a nine week low but also implying a downside projection of 1.4860. Interestingly the market has paid good attention to the Fibonacci retracements of 1.4760/1.5645, with the 76.4% Fib at 1.4970 acting as a basis of support. The negative outlook on momentum indicators reflects this outlook, and means that there is a band of resistance to act as a “sell zone” on a technical rally between 1.5040/1.5100 (the latter being the 61.8% Fib level). A move that continues to close below the 76.4% Fib at 1.4970 would imply a full retracement to 1.4760 is likely.
Looking at AUDJPY intraday (4-hour chart), the downwards move seems overstretched (oversold technical indicators, price outside Bollinger bands), implying a small U-turn in the hourly chart. However as mentioned above, the pair has been encroached by a strong bearish momentum. Therefore after the break of October’s low which coincides with the 20 DMA, at 78.50, the next level to be watched is the 77.20 (50% Fib. level and January’s Support).
If the pair breaks the latter, there isn’t much else to stop the pair from falling back towards the 76.00 level (29-month low) and the 38.2% fib level at 75.60. On the flipside, Resistance can be found at 78.80, which acted as Resistance for nearly for the whole January, but it is also set at the 61.8% fib. level and the S2 of the day.
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