AUD/JPY is down 0.6% in trading today
The low today touched 82.07 and tested the 38.2 retracement level @ 82.12 before bouncing back up. Buyers managed to retrace earlier losses to about 82.50 levels but we're starting to see the downside momentum resume once again.
Looking at the hourly chart:
Price has managed to stay above the 100-hour MA (red line) in the last two hours but sellers are now knocking on the door and looking for a break to the downside once again. For buyers, hold above and the near-term bias favours them more. But you can't ignore the fundamentals.
The market is risk-off and China is slated to escalate the trade rhetoric further, and that works as a negative for the aussie and positive for the yen. It's a double whammy, and that must be taken into account as well.
The trade so far for the last few months has been to fade the trade rhetoric, but the ramifications of further escalation makes it more difficult to justify fading such an event when there is no clear cut way of pricing in or calculating the potential effects it will have on the global economy.
So, what's a trader to do?
Factor in the fundamentals, and use the charts to define and limit your risk. Right now, price action is moving back down below the 100-hour MA and that is a signal indicating that sellers are looking to get back in the driver's seat for AUD/JPY.
Stay below and move below the 82.12 level (as well as 82.00 handle, with the 200-hour MA seen at 81.95), then there is further conviction for a downside move back towards the year's lows under 81.00.
But should buyers keep cool and hold onto support at those levels mentioned, then a bounce back is likely on the cards. However, with risk sentiment so badly hit today and the market awaiting countermeasures by China it's hard to see buyers finding a reason to buy further dips until the dust settles.
