AUD/JPY Price Analysis: Bulls approach 86.00 amid risk-on environment

• Positive market sentiment favors risk-sensitive currencies, like the AUD.
• AUD/JPY: The prevailing trend still tilted to the upside on the back of the interest rate differentials.
• AUD/JPY: Closes to 86.00, on the back of a risk-on environment.

The AUD/JPY advances as the Asian session begins, barely up 0.02%, trading at 85.93 at the time of writing. The market sentiment is upbeat, as the Asian sessions follow through the New York footsteps, with Asian equity futures rising between 0.02% and 1.45%, except for the Japanese Topix, which drops 0.25% at press time. 

The positive market sentiment has gained follow-through since Monday. Robust third-quarter US corporate earnings remain the main driver of the financial markets, as companies have printed numbers better than expected, despite the ongoing elevated energy costs and rising raw materials around the globe.

AUD/JPY Price Forecast: Technical outlook

Daily chart

The AUD/JPY is trading at fresh five-month highs, trading above the May 10 high of 85.80, on the doors of 86.00. In the case of a daily close above the latter, December 5, 2017, high at 86.84 would be the first resistance. A sustained break of that level would expose crucial supply areas towards an 89.00 challenge. Firstly January 10, 2018, low at 87.20, followed by January 31, 2018, high at 88.49.

On the other hand, failure at 86.00 could send the AUD/JPY tumbling lower. A daily close below the 84.27 level could spur a downward move towards 83.80. A breach of the latter would expose the 200-day moving average (DMA) at 82.47.

The Relative Strength Index (RSI), a momentum indicator, is at 82, in overbought levels, indicating that the AUD/JPY might consolidate. That outcome could open the door to a “buy the dip” narrative, as the upward bias is confirmed by the daily moving averages (DMA’s), which are located well below the spot price.