AUD/JPY Price Analysis: Loses momentum below the 94.00 area, within a descending trend channel

• AUD/JPY trades within a descending trend channel from the middle of June.
• The first resistance level for AUD/JPY emerges at 94.40; the initial support level is seen at 93.70.
• The Relative Strength Index (RSI) holds in bullish territory above 50.

The AUD/JPY cross loses momentum near 94.00 heading into the early European trading hours on Thursday. The cautious mood in the market and the downbeat Australian S&P Global PMI data weigh on the Aussie and act as a headwind for the cross.

The Australian S&P Global Composite PMI fell to 47.1 on Wednesday, from 48.2 in July. In the meantime, the Manufacturing PMI decreased to 49.4 from the 49.6 anticipated and previous, and the Service PMI decreased to 46.7 from 47.9 expected and in the previous month. Apart from the data, the divergence of monetary policy between the Bank of Japan (BoJ) and the Reserve Bank of Australia (RBA) might cap the downside in AUD/JPY as the Japanese central bank keeps ultra-easy monetary policy while allowing long-term rates to move more flexibly.

According to the four-hour chart, AUD/JPY trades within a descending trend channel since the middle of June. That said, the path of least resistance for the AUD/JPY is to the upside as the cross just holds above the 50- and 100-hour Exponential Moving Averages (EMAs).

The first resistance level for AUD/JPY emerges at 94.40, representing the upper boundary of a descending trend channel. The additional upside filter to watch is 94.90 (high of August 15). Any meaningful follow-through buying above the latter will see a rally to 95.40 (high of July 14) and finally at 95.85 (high of July 31).

On the flip side, the cross will meet the initial support level at 93.70, highlighting a confluence of the 50-hour EMA and a low of August 16. The next downside stop appears at 93.50 (low of August 22), followed by a psychological figure at 93.00. A break below the latter will see a drop to 92.60 (the midline of the descending trend channel) en route to 91.80 (the high of May 8) and finally at 91.35 (the lower limit of the descending trend channel).

It’s worth noting that the Relative Strength Index (RSI) holds bullish territory above 50, supporting the buyers for now.
 

AUD/JPY four-hour chart