Australian Dollar (AUD/JPY) Price Outlook:
- Continued risk appetite has helped AUD/JPY climb higher, beyond pre-covid levels
- Recent gains saw the pair attack longstanding resistance which may now act as support
- That said, hints of risk aversion in equity markets could undermine the Australian Dollar if they continue
Australian Dollar Price Forecast: AUD/JPY Eyes Bullish Continuation
AUD/JPY broke above an area of key resistance last week, moving beyond the 76.85 mark for the first time since May 2019. Widespread risk appetite and continued economic recovery in the wake of the coronavirus have helped bolster the Australian Dollar and further progress may allow for more AUD/JPY gains. Either way, the medium-term outlook for the pair has likely enjoyed a boost after the recent technical break.
AUD/JPY Price Chart: 4 – Hour Time Frame (June 2020 - September 2020)
To that end, prior resistance around the 76.85 mark had worked to keep price contained since early June most recently, but had shown varying levels of influence dating back to May 2019. Thus, the bullish break above 76.85 can be viewed as a rather significant technical development – one that may have opened the door for a continuation higher.
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With that in mind, there is little to suggest price will continue higher unabated. Possible resistance resides narrowly overhead around the 78.68 mark and the Australian Dollar could come under fire if risk aversion experiences a meaningful increase. Nevertheless, AUD/JPY can look to enjoy a variety of potential support beneath.
An ascending band from mid-June helped guide price higher into September, despite a brief breakdown in late August. While minor, the bearish break could have seriously undermined the level’s significance, so support around this level going forward might be tenuous at best.
Thankfully for bulls, secondary support might be offered by the level at 76.85 and the 200-period moving average on the 4-hour chart which seemingly stalled the reversal in late August. Together, these various levels could offer a bounty of support to AUD/JPY as it looks to continue its gradual trend higher. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
| Change in | Longs | Shorts | OI |
| Daily | -23% | 9% | 2% |
| Weekly | -51% | 24% | -3% |
Further still, IG Client Sentiment Data reveals retail traders are net-short AUD/JPY, an encouraging sign as we typically take a contrarian stance to IGCS data.
--Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
