AUD/JPY bounces off key support

The AUD/JPY has bounced strongly off a key support level today, suggesting that the recent downward trend may have come to a halt, at least for the time being anyway. We have also seen a correspondingly sharp rally on Wall Street, suggesting that the appetite for risk is still there despite the recent weakness and uncertainty about French elections on Sunday. But for now, we will take this bounce with a pinch of salt as it could be a ploy to trap the bulls before the next leg down.

As far as the AUD/JPY is concerned, well there has been a classic bounce from an old key resistance level of 81.50, which has turned into strong support. The unit has bounced a cool 100 pips off this level, though it was coming off the highs at the time of this writing. In addition to the horizontal support level, there is a vertical trend line and the 200-day moving average coming in close proximity. Thus, the area around 81.50 represents an important technical juncture, which means today’s bounce in AUD/JPY could merely be a technical bounce rather something more significant. But with price now being above Wednesday’s high and the 200-day average, both at 82.15, this level may turn into support upon a potential retest. If so, the AUD/JPY could climb towards, and possibly beyond, the next resistance levels at 82.80 and then 83.80.

But if the 82.15 level fails to hold as support then there is a good possibility that the AUD/JPY may go on to break below that critical 81.50 support at the second time of asking. Should that happen then we will be on the lookout for a deeper correction, possibly towards the 61.8% Fibonacci level at 78.50 or all the way to the psychological level of 75.00 next.

 

Risk Warning Notice Foreign Exchange and CFD trading are high risk and not suitable for everyone. You should carefully consider your investment objectives, level of experience and risk appetite before making a decision to trade with us. Most importantly, do not invest money you cannot afford to lose. There is considerable exposure to risk in any off-exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of the markets that you are trading. Margin and leverage To open a leveraged CFD or forex trade you will need to deposit money with us as margin. Margin is typically a relatively small proportion of the overall contract value. For example a contract trading on leverage of 100:1 will require margin of just 1% of the contract value. This means that a small price movement in the underlying will result in large movement in the value of your trade – this can work in your favour, or result in substantial losses. Your may lose your initial deposit and be required to deposit additional margin in order to maintain your position. If you fail to meet any margin requirement your position will be liquidated and you will be responsible for any resulting losses.