AUD/JPY Price Analysis: Stumbles below 93.00 on dismal sentiment and recession fears

• The inversion of the US yield curve for the 7^th straight day exacerbated recession fears, capping AUD/JPY’s upward move.
• AUD/JPY is upward biased, but failures to break above 93.00 opened the door for sellers to send the pair lower.
• The AUD/JPY might tumble towards the 92.20 area in the short term.

The AUD/JPY curtails two days of consecutive losses and rises modestly on Wednesday, close to 0.39%, amidst a dismal market mood. Higher global inflation, US recession fears, and the EU’s energy crisis could begin triggering a flight to safety in the financial markets and helped to put a lid on the AUD/JPY advance, which reached a daily high of around 93.38 before settling around the current price levels. At the time of writing, the AUD/JPY is trading at 92.86.

US equities finished Wednesday’s session with minimal losses but weighed by the further inversion in the US 2s-10s yield curve and money market futures swaps showing the likelihood of a 100 bps rate hike in July, sparked safe-haven flows. So in the last couple of hours, the AUD/JPY slid from around 93.15 to 92.78.

AUD/JPY Daily chart

The AUD/JPY depicts an upward bias, though AUD buyers’ failure to break above the falling wedge illustrated inside a larger rising wedge might open the door for sellers to step in and drag prices lower. Traders should notice that oscillators like the Relative Strength Index (RSI) in negative territory begin to aim lower, further cementing the case for a downward break of both wedges.

Therefore, the AUD/JPY first support would be the 50-day EMA at 92.55. A breach of the latter would expose the July 12 daily low at 91.96, followed by the 100-day EMA at 91.33 and then the 200-day EMA at 87.06.

AUD/JPY 1-hour chart

From a short-term perspective, the AUD/JPY is upwards-to-neutral biased, though the formation of an ascending channel about to be broken to the downside, alongside the breach of the daily pivot point, around the 92.70-80 area, might trip the AUD/JPY pair towards lower prices. Hence, the AUD/JPY path of least resistance is tilted to the downside. The first support would be the 200-hour EMA at 92.65. Break below ill expose the 40-hour EMA at 92.60, followed by the confluence of July’s 12 low and the S1 daily pivot around 92.20-30.

AUD/JPY Key Technical Levels