AUDJPY bounces off key support

After peaking around 96.65 at the start of the month, the AUD/JPY has fallen in excess of 200 pips. The Aussie has been weighed down above all by the recent weakness in commodity prices, disappointing economic data from China and continued verbal intervention from the RBA. But the worst of the selling could be over for the Aussie, at least in the short-term and especially against the JPY.

The AUD/JPY currency pair has recently been behaving more technically-friendly, which makes trading arguably easier. For instance, the currency pair today bounced off key support at 96.50, a level which was previously resistance (as indicted by the red and blue arrows on the chart). This is almost like a textbook reaction, which goes to show that price action trading remains a popular strategy by market participants. Anyway, it looks increasingly likely that the AUD/JPY will now fill the gap that was created at the weekend around 96.95. Beyond here, the next level to watch is 97.25 which ties in with the 38.2% Fibonacci retracement level of the down move from this month’s peak, followed by the 61.8% retracement at 97.80. The key takeaway point is that the reaction at 96.50 suggests the bullish trend has been maintained – at least for now anyway.

If however the 96.50 level breaks on a closing bases then that could pave the way for further losses. In this case, we could easily see a drop towards the 61.8% Fibonacci retracement of the last upswing at 95.75 or even the 78.6% at 94.95. The bears could take some encouragement from the bearish crossover on the MACD. However, it is worth pointing out that the MACD is a secondary indicator and lags price action.

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Source: FOREX.com.