Since the end of January, AUD/JPY has traded in a sideways range between 77.44 – 79.84. It’s unclear at this stage which side it will eventually break out of but, we see potential for AUD/JPY to trade lower from the highs of its range. Indeed, it appears to have favoured traders who sold near the highs or bought near the lows of the range, and with prices now trading lower, it appears this pattern intends to hold.
US Government Bonds 10 Yr Yield
Interestingly, AUD/JPY has hit resistance at the top of its range just as the US 10-Y and US 2-Y have hit resistance levels. Given they both remain within a downtrend and, like AUD/JPY, are considered a barometer of risk, then we see potential for sentiment to turn lower. That said, if we see US yields break higher then it leaves the potential for AUD/JPY to also break higher in tandem and out of rage. Therefore, it could pay to watch yields in tandem with AUD/JPY at this potentially pivotal moment for risk.
Australian Dollar-Japanese Yen 1 Day
AUD/JPY is currently trading lower for the session after printing a bearish pinbar on Friday. Furthermore, the stochastic oscillator is overbought territory and on the verge of providing a bearish sell-signal. With the market ranging, conditions are ideal for oscillators which tend to provide more false signals during a strong trend. If the range holds and sentiment turns lower, we could well see AUD/JPY head back towards the February lows. Bears could look to fade into any retracement below 79.26 (Friday’s low) for a more attractive entry level. However, given the range is around 240 pips, it could also serve well to trade from the daily chart.