AUD/JPY Buyers Aim to Solidify Gains Above Ichimoku Cloud

Market Overview

On Monday, the Australian dollar faced some pressure after a disappointing financial stimulus briefing from Beijing lacked the details investors were hoping for. However, the limited market reaction in China helped to contain the downward movement for the Australian dollar. On the other hand, Japanese yen also weakened due to reduced trading activity as Japan observed a market holiday. This gave some upward traction to the AUD/JPY pair, allowing it to edge higher despite external uncertainties.

The evolving narrative surrounding expectations for U.S. interest rates also affected the dynamics of both currencies. Despite the weaker tone in Australian dollar sentiment initially, the reduced liquidity and weakness in yen helped AUD/JPY maintain a relatively stronger position in the market.

Technical Analysis

The AUD/JPY pair is showing promising signs of stabilization as it attempts to hold above the Ichimoku cloud on the daily chart. The recent price action indicates a recovery after bouncing from a confluence of support at 99.079. This support zone includes the Kijun-sen average, aligning with the lower boundary of the Ichimoku cloud, suggesting a solid support base for buyers.

Currently, the price is attempting to overcome the first key resistance at 101.411. If buyers manage to break above this significant resistance, it could pave the way for a more pronounced rally, with the next targets set at 102.045, 102.852, 103.743, and ultimately reaching 104.708. The outlook is further supported by a bullish Kumo twist (an upward flip in the Ichimoku cloud), which implies a potential continuation of the bullish momentum in the medium term.

Technical indicators confirm the ongoing bullish bias:

The RSI remains above 50, currently indicating increased buying pressure, suggesting the pair is comfortably in a positive zone but not yet overbought, allowing for potential gains without a significant risk of correction.

The MACD indicator is also in positive territory, with its histogram reflecting steady buying momentum.

Price action has managed to hold above the key moving averages, including the Kijun-sen and the Tenkan-sen, adding to the overall bullish scenario.

The pair’s ability to stabilize above the Ichimoku cloud will be crucial for determining whether the buyers maintain control of the market or if sellers can regain some ground.

Alternative Scenario

In the event of a failed breakout above 101.411, sellers may try to push the price back into the Ichimoku cloud, targeting the immediate support levels at 100.245 and then 99.079. A sustained break below 99.079 would indicate renewed selling pressure, potentially driving the price back into the cloud towards the Tenkan-sen. This could lead to a shift in sentiment from bullish to more neutral or bearish, depending on how well these support levels hold.

Key Levels Overview

Resistance Levels:

• Resistance 5: 104.708
• Resistance 4: 103.743
• Resistance 3: 102.852
• Resistance 2: 102.045
• Resistance 1: 101.411

Current Price: 100.444

Support Levels:

• Support 1: 100.245
• Support 2: 99.079

Key Events to Watch

Several key events are likely to influence the AUD/JPY pair over the coming days:

On Tuesday, the Chinese trade balance report will be closely monitored during the Asian trading session. As China is Australia’s largest trading partner, positive trade data could bolster the Australian dollar, providing additional support for AUD/JPY.

Meanwhile, Japan’s industrial production data is also due on Tuesday, which could affect the yen’s valuation. Improvements in Japan’s production outlook may strengthen the yen, adding potential downside risks for AUD/JPY.

Investors should also keep an eye on broader market sentiment, particularly as any sign of increased mineral consumption in China could provide a significant boost to the Australian dollar, given Australia’s strong ties to commodity exports.

Conclusion

The AUD/JPY pair is navigating an important juncture as buyers attempt to push prices above the Ichimoku cloud and maintain a foothold above key resistance levels. A sustained breakout above 101.411 could lead to further gains, targeting 102.045, 102.852, and beyond. However, should the buyers fail at this level, sellers may look to regain control, with critical supports in focus around 100.245 and 99.079.

As the pair consolidates in a potentially bullish setup, upcoming economic data from China and Japan will be key in determining the sustainability of the recent upside momentum. Traders should be prepared for increased volatility as these events unfold, especially considering the AUD’s sensitivity to shifts in Chinese demand and JPY’s reaction to domestic economic indicators.