AUD/JPY Provides a Negative Reversal Signal While in Consolidation
Consolidating, still Bearish:
- The AUD/JPY indeed opened up a short-term rally since completing a 5-wave decline to 83.12. This push made a high of 85.30 and has since shown consolidation
- During this relatively flat consolidation, we are seeing a second rally attempt fail to break above 85.30.
- The RSI reading in the 4H chart however was able to break the previous high, but found resistance at 60. Staying below 60, the RSI reading would reflect maintenance of the bearish momentum.
- The fact that the RSI reading was higher, but the price high was lower, is a negative reversal signal.
Bearish Targets:
- This has a conventional swing projection, in this case towards 83.42.
- The bearish outlook is at the moment contained above the 200SMA in the daily chart. Therefore, if we clear below the recent low of 83.12, we can open up lower support pivots, 82.20 in the very short-term (50% retracemen and channel support).
- More aggressively, the range (roughly between 87.55 and 84.40) breakout target is near 80.50, right above the 61.8% retracement level.
-Clearing back above 85.40 is a sign that the market is respecting the 200SMA, and wants to retest the 87.50-87.55 resistance area.
Fundamental Risk:
- The Aussie is slightly bearish, even as gold rallies. The correlation has not been holding up lately. This suggests that the market is minding the Australian economy, and the possible slowing down in China as well.
- The AUD/JPY is also a barometer of risk sentiment. Resolution of European debt crisis, as well as unified approach dealing with the US debt ceiling and overall budget issues are things that can boost risk appetite. In tat regards, tomorrow’s EU summit can shake things up for the Aussie-Yen as well.
- Otherwise, the sentiment is negative on both fronts, and provides a drag on the AUD/JPY.
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