AUD/JPY has retracted 50% of 2014 - 2016 sell-off, eyes China data

Friday’s rally finally saw the AUD/JPY pair cut through 87.64, which is the 50% Fib retracement of the sell-off from 102.844 (Nov 2014 high) - 72.44 (June 2016 low).

The cross currently trades around 88.00 levels, with the 14-day RSI hovering in the overbought territory.

Focus on China GDP

China June GDP, Industrial Production and Retail Sales are due at 02:00 GMT. Aussie being a proxy for China could extend the last week’s rally if China data betters estimate. Chinese exports bettered estimated for two out of the last three months. Thus, industrial production may better estimates. Traders would also want to see healthy consumer spending (retail sales) before betting on another leg higher in the overbought Aussie dollar.

A big beat on the data could also lift risk assets and hurt the Japanese Yen.

AUD/JPY Technical Levels

The weekly chart shows an Inverse head and shoulders breakout, which suggests the sell-off from 105.43 (2013 high) has ended.

A break above the immediate hurdle of 88.18 (Feb 11 high) would open up upside towards 88.61 (Oct 2015 high) - 88.68 (weekly 200-MA). If breached, the next major hurdle at 89.16 (July 2015 low) could be put to test. 

On the downside, the area around 87.50 - 87.00 offers plenty support (multiple weekly highs during the first two months of 2017). An end of the week close below 87.00 would open doors for a corrective pullback to 86.00 (zero levels) and 85.67 (July 5 low).

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Neutral High
1H Bearish Neutral Expanding
4H Bullish Overbought Expanding
1D Bullish Overbought Low
1W Bullish Overbought Expanding

 

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