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AUD/JPY: FX bellwether rebounds strongly, resistance ahead

September 1, 2021 |
　　　

AUD/JPY is often viewed as the best risk barometer for FX and the key metric to gauge broader risk sentiment. With risky assets enjoying the bump from a cautious and more balanced Fed Chair speech last week, this currency pair has bounced back strongly after hitting eight-month lows at 77.89. Prices had printed seven straight down days up until that point, with the daily RSI firmly in oversold territory below 25.

Since then, the positive risk mood has boosted the aussie and hurt the yen, taking it through the first resistance level at 79.83, the mid-July low which now becomes support. This tallies also with the 23.6% Fib retracement of its May-August drop at 79.57.

We’ve seen a strong bullish move higher today with AUD and JPY at the top and bottom of the major performance charts. This has taken us through the next Fib level (38.2%) at 80.91, but a strong close will be important here to maintain bullish momentum. Resistance above comes in at the 50-day SMA at 81.21, ahead of the widely watched 200-day SMA at 81.93. Of course, much of the risk outlook and potential direction of this pair will depend on Friday’s NFP report.