In the wake of the Fed’s rate hike, Wall Street closed lower and led to a bearish session across Asian bourses. Stock market declines haven’t been too substantial for the most part as investors digest the hawkish tone of the Fed one hand and its plainly bullish assessment of the U.S. economy on the other. In firming today, the Yen has followed its oft-seen inverse correlation with global equity market direction.
The biggest movement out of the main currencies has been seen by AUDJPY and is showing a loss of over 0.9%. The AUDJPY is a cross which trades like a high beta asset and which has been under further pressure this morning, following a sub-forecast Australian employment report.
Ahead today, the ECB is expected to announce the end of QE, while U.S. President Trump will reportedly decide whether to proceed with tariffs on Chinese goods later on Thursday (his unabashed form this week suggests he won’t hold back). Therefore Fundamentals are likely to affect safe haven currencies such as Yen and therefore to boost AUDJPY. The risk however, for a sustained bout of equity market turbulence suggests the pair may be heading lower over coming sessions.
As fundamentals are bullish for AUDJPY, the technical picture of the pair remain bearish in short-term. In the 4-hour chart, the strong bearish move below 20 and 50-period EMA, and outside the the lower Bollinger Band pattern, coexists with negative signs out of intra-day momentum indicators. The RSI is flattening on 30 barrier, while MACD oscillator slips above its trigger line in the negative area, something that suggests that downside momentum is increasing. A potential crossing of 50-period EMA below 200-period EMA today, could provide another confirmation of the downwards move, in the 4-hour chart.
Despite the above, the pair is currently trading at a key level, at the 200-period EMA, i.e. at 83.00. A break or an hourly close below this level area today, could trigger a retest of Friday’s low and the 23.6% Fibonacci level at 82.50. Support comes at 83.30.
In a wider review of AUDJPY moves in a soft uptrend since March, while it retested several times the resistance at 84.00. So a close today above June’s low at 82.20, could alert the continuation of the recovery uptrend in long-term.
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