Matt Weller, CFA, CMT
Faraday Research
Greece’s debt drama stretched further into its third act today, with optimists still holding out hope that a last-second bailout deal could be cobbled together. Greek Finance Minister Yanis Varoufakis has already categorically confirmed that Greece won't make its payment today, but there were some hopeful signs from the Mediterranean nation. Despite harsh rhetoric over the weekend, Eurogroup President Jean-Claude Juncker has apparently offered a last-minute solution to Greek Prime Minister Alexis Tsipras in exchange for the government endorsing a “yes” vote (to the bailout offer) in Sunday’s referendum. The Syriza party is already on record supporting a “no” vote, but hope springs eternal for a last-second pivot.
One way or another, more uncertainty and hand-wringing is almost certain heading into this weekend’s election, and the safe-haven Japanese yen has been in demand as a result. The widely-watched USDJPY pair dropped down to test previous-resistance-turned-support at 122.00 in today’s early European session, but has yet to fill this weekend’s big bearish gap. For that reason, a pair like AUDJPY could present one of the better ways to play any Greece-induced risk aversion over the course of this week.
Technical View: AUDJPY
Looking to the chart, AUDJPY’s big weekend gap took the pair below key previous support at 94.50, but rates have now retraced back up to test that level and fill the gap. The pair’s 50-day MA comes in at 95.00 and could also provide resistance in the same general zone. At the same time, the MACD is trending lower and has crossed below the “0” level for the first time in over two months, suggesting that the momentum has now shifted in favor of the bears. Meanwhile, the 14-day RSI indicator has dropped to a new 2-month low of its own after a clear bearish divergence.
As we go to press, AUDJPY sits at a very precarious position: the big technical breakdown and bearish secondary indicators hint at the potential for more weakness, but a break back above the 50-day MA around 95.00 would shift the outlook back to neutral. If we do see the unit roll over off 94.50 - 95.00 resistance, bears may watch for a move back down to yesterday’s panic low and the 61.8% Fibonacci retracement near 92.50.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
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