AUD/JPY Sellers Strive to Maintain Market Control
Market Overview
The Japanese yen reached its lowest level against the US dollar in six months on Wednesday. However, it demonstrated relative strength against Oceanic currencies, including the Australian dollar, which continues to be weighed down by weak economic data and subdued inflation. The Australian dollar remains under pressure, trading within a descending channel against the yen, reflecting the broader bearish sentiment.
Technical Analysis
The AUD/JPY pair is trading within a well-defined descending channel on the 1-hour chart. Despite a brief recovery by buyers, the price broke below the critical support at 98.040, signaling continued dominance by sellers. As long as lower highs and lower lows persist, the bearish trend remains intact.
Currently, the pair is approaching the 161.8% Fibonacci extension level from the previous upward swing, situated at 97.759. A decisive break below this key support would pave the way for further declines toward the channel’s lower boundary, overlapping with the 97.585 level. Momentum oscillators reinforce the bearish narrative, with both RSI and MACD confirming downward momentum.
On the other hand, a reversal would require buyers to reclaim the resistance at 98.214. A break above this level could encourage a bullish shift, targeting the next major resistance at 98.495.
Key Levels to Watch
- Resistance Levels: 98.040, 98.214, 98.495
- Support Levels: 97.916, 97.759, 97.585
Fundamental Drivers
Japanese economic data continues to be a key focus, particularly the Household Spending report due on Friday. This indicator, which adjusts expenditures for inflation, will provide insights into domestic demand. A smaller-than-expected decline in spending could offer support to the yen, signaling resilience in household demand despite broader economic challenges. However, the yen’s movements remain highly sensitive to speculation about potential intervention by the Bank of Japan.
For the Australian dollar, weak inflation and softening economic conditions have kept pressure on the currency, particularly against the backdrop of risk-averse sentiment in the market. Any signs of renewed strength in the yen or further deterioration in Australian data could exacerbate the bearish outlook for AUD/JPY.
Conclusion
AUD/JPY remains in a bearish trend, with sellers targeting the 97.759 support level and potentially extending declines toward 97.585. Buyers must break above 98.214 to challenge the bearish structure and shift the market sentiment.
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