Market news
18.05.2022, 22:02

AUD/JPY Price Analysis: Broke a bearish flag and accelerates towards 89.00 and beyond, as bears eye 87.30

  • On Wednesday, the AUD/JPY grinds lower by almost 2% on weak Aussie data and dismal sentiment.
  • A bearish flag in the 1-hour chart targets 88.40, but the market mood could drive prices towards 88.00.
  • AUR/JPY Price Forecast: In the 1-hour chart is downward biased and could aim towards 87.30 if bears achieve a daily close below 88.40.

The Australian dollar gave back its Tuesday’s gains after Wednesday’s Asian Pacific session began on the wrong foot, once the Wage Price Index (WPI) rose lower than estimations, meaning that expectations of a 40-plus bps rate hike by the Reserve Bank of Australia (RBA) wane, putting 25-bps instead in play. At the time of writing, the AUD/JPY is trading at 89.22.

Sentiment remains dismal, as shown by US equities tumbling between 3.57% and 5.06%. Asian stocks point to a lower open, and those factors in the FX market weighed on risk-sensitive currencies, like the AUD, the NZD, the CAD, and the GBP.

During the Asian session, the Australian economic docket featured the Q1 Wage Price Index rose by 2.4% y/y, lower than the 2.5% estimated, while the quarterly reading grew 0.7%, also less than the 0.8% foreseen. Even though both figures grew more than the previous period, they are trailing the high inflationary pressures in Australia, with the inflation rate reported at 3.7%, the highest since 2009, and headline inflation reaching 5.1%.

Once the data is in the rearview mirror, that would likely deter the RBA from increasing the size of tightening monetary policy, as some banks backpedaled from expecting a 40-bps rate hike to a 25-bps one.

Meanwhile, during the overnight session for North American traders, the AUD/JPY opened around 90.89, but once the Aussie WPI was released, the cross-currency pair tumbled, following the AUD/USD, which also erased Tuesday’s gains. That said, the AUD/JPY fell below the 50, 200, and 100-hour simple moving averages (SMAs) each at 990.44, 90.19, and 89.77, respectively, and settled around 89.10s.

AUD/JPY Price Forecast: Technical outlook

From a daily chart perspective, the cross stills neutral-upward biased, but failure at 91.00 leave the pair vulnerable to further selling pressure, which means that the AUD/JPY might tumble towards 87.30 before resuming the uptrend.

The AUD/JPY 1-hour chart depicts the pair as downward biased. The ascending channel, which depicted a bearish flag, kept the price within those boundaries until it finally broke around 90.10, which exacerbated the cross fall towards 89.10s.

That said, the AUD/JPY first support would be the 89.00 mark. Break below would expose the S1 daily pivot at 88.44, followed by the 88.00 mark, and the S2 daily pivot at 87.72, before reaching the abovementioned 87.30 YTD low.

Key Technical Levels


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