AUD/JPY remains in bearish hands while below 38.2% Fibo retracement of Sep 2017 decline

Markets traded mostly quietly given the US holiday overnight but European equities weakened a little despite as traders soaked up the soft Chinese data and ignored the robust performance in Asia's gains.

AUD/USD was a touch lower on the day, around 0.7160 which sent the cross lower to print a fresh hourly swing low of 78.28. Despite the Chinese data dump and softness, the IMF shaving 0.2%pts off their 2019 global growth forecast to 3.5% was the big noise in the markets. The fund is citing softer momentum in H2 2018, particularly across Europe, which is weakening financial market sentiment ahead of the ECB later this week and weighs on high beta FX such as the antipodes. The fund's 2020 outlook was trimmed 0.1%pts to 3.6% and is the second downgrade in a row (the last was in October).

Eyes on Brexit and China risks

"While there have been some positive developments in recent weeks (some rebound in manufacturing data and progress towards US-China trade talks), risks remain skewed towards weaker growth, with a “no deal” Brexit and a sharper-than-expected slowdown in China getting a special mention," analysts at ANZ Bank explained. 

Australia’s calendar is quiet again today but we have the Dec employment data on Thursday. 

AUD/JPY levels

AUD/JPY is chipping away at the downside, eyeing a break of S1 located at 78.37 and target  S2 and the confluence of the round 78 level and 200-hr SMA at 78.13 just slightly ahead. There is a cluster of fractals located around S3 at 77.74. On the flip side, should the price manage to break through the weekly pivot of 78.50 and close higher than 79.10, this would leave a bullish tint on the market considering the 38.2% Fibo retracement of the mid-Sep 2017 and 2018 decline at 78.75 has been left behind and bulls are in charge, targetting weekly R3 ad confluence of the 505 Fibo of the same retracement at 80.94/84 respectively.