AUD/JPY Aims Higher After Triangle Breakout

23/10/2024

Market Overview

On Wednesday, the Japanese yen weakened, driven by the anticipation of upcoming general elections in Japan and the forthcoming Bank of Japan (BoJ) meeting. The yen touched its lowest level in three months, reflecting the political and economic uncertainty surrounding Japan. Meanwhile, the Australian dollar capitalized on regional risk aversion and the broader weakness of other regional currencies, strengthening against the yen. Furthermore, the resilience of the U.S. economy and expectations for a slower rate cut pace from the Federal Reserve have added further pressure on the yen, benefiting the AUD/JPY pair.

Technical Analysis

In the 4-hour timeframe, AUD/JPY displays a bullish scenario that has gained momentum following a breakout from a triangle pattern during Tuesday’s trading session. The break above the resistance at 100.831 confirmed the bullish sentiment, positioning the price for a move towards the next key level at 101.724. Should the pair achieve a sustained break above 101.724, further gains are expected, targeting 102.276 and ultimately 103.169.

Oscillators support the bullish scenario. The RSI currently hovers in overbought territory, which may indicate a potential pause in the rally, suggesting that buyers may need to consolidate gains. On the other hand, the MACD remains in positive territory, reinforcing the upward trend. The price also holds above the moving averages, reflecting the overall strength in buying pressure.

Alternative Scenario

The alternative scenario comes into play if the price falls back below the key support level at 100.831. Such a move would invalidate the bullish outlook and potentially signal a deeper retracement.

Key Levels Overview

Resistance Levels:

Resistance 1: 101.724
Resistance 2: 102.276
Resistance 3: 103.169

Current Price: 101.650

Support Levels:

Support 1: 101.383
Support 2: 101.074
Support 3: 100.831
Support 4: 99.938

Key Events to Watch

The AUD/JPY pair remains sensitive to several key economic events this week. In Australia, the Manufacturing and Services PMI for October will provide insights into the nation’s economic health. The previous report showed a decline in manufacturing activity, with the index at 46.7, while the services sector held at 50.5, indicating modest growth. Meanwhile, in Japan, attention will focus on foreign investments in Japanese bonds and equities, as well as the Manufacturing PMI for October. The previous figure of 49.9 suggested contraction in the manufacturing sector, and the upcoming data will be pivotal in shaping expectations around Japan’s economic trajectory.

These events are likely to create significant volatility in the AUD/JPY pair, potentially impacting its direction based on the underlying economic developments in both countries.

Conclusion

AUD/JPY is eyeing higher levels after a confirmed breakout, with key resistances in focus. A sustained move above 101.724 will reinforce the bullish momentum, while failure to maintain gains could bring the alternative bearish scenario into play. Traders should monitor upcoming economic releases closely for further market cues.