AUDJPY Key Level on Watch
Putting the focus back on AUDJPY this week. A previously highlighted setup is still in the offing here. The market is potentially carving out a head and shoulders pattern, suggesting room for at least a medium-term correction lower. The key level to watch for a is a break of the 90.76 level where bears can target 89.13 initially and 87.25 thereafter. We’ve seen plenty of bearish divergence in momentum studies on the recent move north of 94.23. With the latest attempt to break the level seeing key reversal candlesticks, the focus is now on a downside break.
Keep an Eye On
JPY flows have been heavily short over recent months as monetary policy divergence between the BOJ and other G10 central banks widens. However, despite the RBA hiking rates last week, AUDJPY has failed to break higher, with AUD suffering as a result of broader risk-off trends developing. If equities prices continue to tank this week, and recessionary fears continue to grow, JPY is likely to see stronger safe-haven inflows building, weighing on AUDJPY near-term.