– The Aussie can track growth in China. If the economy is still humming along, the Aussie can still be supported, otherwise, it could be time for further consolidation, or bearish correction.
– The Japanese yen stands to gain in the event of risk aversion (more so than the USD at the moment).
– Q2 GDP: 9.5% (forecast 9.5%, prev: 9.7%).
– Retail Sales y/y: 17.7% (forecast 16.9%, prev: 17.0%).
– Industrial Production y/y 15.5% (forecast 13.2%, prev:13.3%)
– This data allows some room for an upside correction in the AUD/JPY after the recent sharp decline.
– The 4H chart supports a short-term rally, now that the market completed 5-waves down to complete a bearish impulse wave. The RSI is also resolving the oversold condition. A short-term bullish attempt is in sight.
– The medium term outlook however, should be bearish, and a very important resistance to maintain this mode is the 85.40, 50% retracement level.
– Also note in the 4H chart that the volatility reflected by the ATR (Average True Range), has surged. This helps confirm the bearish breakout.
– Looking at the daily chart, the market is at the last line of defense so to speak, against the bearish attempt.
– Note the RSI reading still above 40, and price action above 200SMA. If the market stays below 85.40 however, there is a chance to confirm a bearish breakout.
– The target to the downside using a range breakout projection, targets 80.50, just above the 61.8% retracement level.
– Above 85.40, the market returns to ranging mode, with very short-temr bullish outlook towards the 87.55 high.
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Fan Yang CMT
Chief Technical Strategist