AUD/JPY's price action during past 2 days is suggesting a possibilities of a short-term reversal. The wide gap in the lows and close/open price is clearly indicating a fear for the downside. However, the pair has been engaged in a very volatile sideways mode for past 15 weeks even if the lows have been getting lower. This has been a classic example of push and pull when both the currencies of the pair have been having the same bearish sentiments. On one hand the JPY is weakening in general and on the other hand the same story is with the Aussie which is clear from the price action of the Australian dollar against the USD. Both these currencies with overall weakening have been cancelling that effect against each other by being in the range. Though overall the weakness of the Australian dollar seems to be more than the Japanese yen as evident from the sideways price action channel slopping down.
There is no change in our views and our outlook remains neutral for AUD/JPY. The pair is stuck between the psychological levels of 90.00 and 95.00 for past 14 weeks. During this period it had tried to break over this range only once and that effort had failed at 95.68. The low of this range has been 90.73.
We expect to see some more sideways action. Overall a breakout on either side is required to expect any directional moves. After the failure at 95.68, the subsequent effort had failed at 94.61. However the price action is staying closer to 95.00 than 90.00 and this fact indicates the possibilities of an upward break out more. On the other side, both the highs and lows have been getting lower and that argues with the former observation and hence supports the neutral outlook initially.
While the initial outlook stays neutral but overall a downward break can not be ruled out sooner or later.
On the upside a break of 94.61 will be the first indication of further gains but even in such case we will wait for a break 95.00. Any break above 95.00 may target 95.68 and then possibly 97.27. However if the 95.00 resistance holds and a decisive break below 91.78 takes place then further drop towards 90.73 to 90.99 support zone will be expected.
Overall, as mentioned above, we stay neutral for AUD/JPY till it stays between 90.00 and 95.00."