5 reasons AUD/JPY is heading lower

As you may well already know, i am bearish on the likes of the Australian and New Zealand dollar. Back on the 26^th October we wrote an article saying to sell the bounce in NZD/USD. Here’s a little excerpt from that article:

“I expect this to be a short-term bounce and will look to re-initiate shorts a little higher up, perhaps close to the 0.7000 handle. A break of the 0.6800 level is expected to bring another momentum move lower”.

That has worked out very nicely indeed. Today I have another potential trade idea for you guys to consider. This time we’re looking to short AUD/JPY.

 From a fundamental standpoint we see AUD lower for many reasons:

• Weaker-than-expected employment growth. Only 3,700 jobs were added last month compared to 17,800 expected.
• Wage data remains subdued.
• AUD has demonstrated an inverse correlation to the US 2year yield, and the stabilising of US core CPI in October will probably lead to a higher core PCE reading next week, adding to AUD weakness.
• High level of household debt that will put pressure on household spending should the RBA raise interest rates.
• Positioning in AUD is still long leaving plenty of room for a move lower. We see the 0.77 level as a key support to watch in AUD/USD.

AUD/JPY has broken key trend line support in an impulsive manner suggesting further downside to come. However, right now price is stalling and the RSI on the daily and 4-hour charts is in oversold territory.

With this in mind, we look for a bounce towards the 85.60 level as an opportunity to sell. 85.60 is a previous major support level, it also coincides with the 200-day moving average, and falls between the 23.6 and 38.2 Fib retracement levels.