Despite the decline in the Australian dollar against the USD last week, the pair AUD/JPY remains in the upward channel on the daily chart and above the moving average lines ЕМА144 and ЕМА200 on the weekly and monthly charts. These three factors plus to ongoing soft policy of the Bank of Japan give ground to suppose that the pair will continue to rise in the medium-term.
Obviously, while analyzing movement direction in the pair AUD/JPY, we shall consider the movement in the AUD and JPY against the USD. Given the latest news on the state of the American economy, forecast of inflation, and probability of raising interest rates before the end of this year, we can assume that the pair AUD/USD will drop, while the pair AUD/JPY will grow.
The rise can be supported by the continuing quantitative easing program by the Bank of Japan and market expectations that the Bank of Japan can suddenly adopt decision about additional measures of monetary policy easing, as inflation is below the target level of 2% and trade deficit of the country is 53.4 billion yen.
In addition, the pair will grow due to difference in the interest rates of Japan and Australia, which is applicable for the strategy carry-trade (trading on the difference in interest rates of different currencies, in order to gain profit on the positive swap, when more expensive currency is bought for the cheaper one). Now interest rate in Japan is 0.1% and Australia – 2.0%.
Support and resistance
On the daily chart the price has support at the levels of 94.55( ЕМА144) and 94.65 (ЕМА200). However, the price is near important resistance level of 95.10 (Fibonacci 38.2%) in the middle of the upward channel (green color).
OsMA indicator shows sales; however Stochastic is turning into buy zone (fast line has crossed the slow line from top to bottom and the level 20 in the window of the indicator).
On the four-hour chart the pair is near the bottom limit of the ascending channel (green color), at the support levels of 94.80 (ЕМА144) and 94.45 (ЕМА200). Stochastic indicates buying. When OsMA exceeds zero line, buy positions will be possible.
Support levels: 94.45, 94.55, 94.65 and 95.10
Resistance levels: 95.80 and 96.45
Pending orders Buy Limit can be placed at the levels of 94.90, 94.80 and 94.45 with the targets of 95.80, 96.45, 97.20 and 97.85 and protective orders of 93.80 and 93.30.
Alternative scenario: sell positions in case of breakdown of the level of 93.45 (23.6% Fibonacci) with the targets of 92.50, 92.00 and 90.75.