AUD/JPY Price Analysis: Surrenders modest intraday gains, seems vulnerable to slide further

• AUD/JPY gains some positive traction during the Asian session, albeit lacks follow-through.
• The technical setup supports prospects for an extension of over a two-month-old downtrend.
• Bears still need to wait for a break below the 100-day SMA support before placing fresh bets.

The AUD/JPY cross attracts some dip-buying near the 93.45 region on Friday and reverses a part of the previous day's retracement slide from over a one-week high. Spot prices, however, struggle to capitalize on the move and remain below the 94.00 round-figure mark through the Asian session, warranting some caution for bullish traders.

The Japanese Yen (JPY) weakens a bit in reaction to data, showing that consumer inflation in Tokyo – Japan’s capital city – grew at a slower-than-expected pace in August, which reaffirms expectations that the Bank of Japan (BoJ) will stick to its dovish stance. This, in turn, provides a modest intraday lift to the AUD/JPY cross, though worries about a deeper global economic downturn keep a lid on further appreciating move for the growth-sensitive Australian Dollar (AUD).

From a technical perspective, spot prices have been oscillating in a familiar range since the early part of the current week. This, in turn, points to an indecision among traders over the next leg of a directional move. Meanwhile, the lack of any meaningful buying and the AUD/JPY pair's inability to capitalize on its recent bounce from the 100-day Simple Moving Average (SMA) suggests that the recent downtrend witnessed over the past two months or so is still far from being over.

Moreover, oscillators on the daily chart are holding in the negative territory and indicate that the path of least resistance for spot prices is to the downside. That said, it will still be prudent to wait for a sustained break below the 100-day SMA support, currently pegged around the 93.00 round figure, before positioning for deeper losses. The AUD/JPY cross might then accelerate the downfall towards the 92.00 mark en route to the July swing low, around the 91.80-91.75 region.

On the flip side, any positive move might continue to attract fresh sellers above the 94.00 level and is likely to remain capped near the monthly peak, just ahead of the 95.00 psychological mark. A sustained strength beyond the latter will shift the near-term bias in favour of bullish traders and lift the AUD/JPY cross further beyond the 95.30 intermediate resistance en route to the 95.80-95.85 supply zone and the 96.00 round figure for the first time since early July.

AUD/JPY daily chart

Technical levels to watch