AUD/JPY tumbled on Thursday and Friday but hit support near the 78.75 zone, and on Monday and early Tuesday, it traded in the green. On the daily chart, the price structure is of lower peaks and lower troughs below the short-term downside resistance line drawn from the peak of the 19th of July. Also, the pair is trading below the lower end of the sideways range that contained most of the price action from mid-February until the 31st of August. So, having these technical signs in mind, we would consider the near-term outlook of this pair to be negative.
A decisive break below 78.75 would confirm a forthcoming lower low on the daily chart and is possible to see scope for extensions towards our next support of 77.85, defined by the low of the 13th of October 2016. Another dive below that hurdle could carry more bearish implications and could open the path towards the 76.75 zone.
Looking at our daily oscillators, we see that the RSI rebounded from slightly below its 30 line and is now back above 30, while the MACD, although below both its zero and trigger lines, shows signs that it could start bottoming as well. These indicators suggest that some further recovery may be in the works before the next negative leg, perhaps for a test near the 79.70 zone, or even the lower end of the aforementioned range, at around 80.70.
Nevertheless, even if this is the case, we would still see a negative picture. The rate would still be trading below the range and below the downside line taken from the peak of the 19th of July. We would like to see a clear close above 80.70 before we abandon the bearish case. Such a break may confirm the return of the pair within the range and could initially target the 81.75 resistance. If that level fails to hold the rate from rising further, then we may see extensions towards the 82.90 area.
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