Deficit of trade balance in Australia was 3.888 billion AUD in April. This is the highest level of deficit recorded in statistics. The data on the Australian retails sales for April was also below the forecast (0% against the forecast of 0.4%). The Australian dollar has dropped significantly against the other currencies.
It is expected that during the Asian session on Friday some important Australian and Japanese indices will be released, including activity index in the construction sector of Australia (AiG) and leading and coincident indices of Japan. They can increase volatility in the pair AUD/JPY. On Friday the market will wait for the US Non-Farm Payrolls, which can set the tone for the monthly movement in the pair.
Although RBA adheres to the soft monetary policy, the Australian dollar is growing in the pair AUD/JPY. The rise is contributed by the difference in the interest rates of Japan and Australia (0.1% and 2.0% respectively) and due to probability of the decision by the Bank of Japan to adopt additional measures of monetary policy easing.
Support and resistance
The pair has broken the level of 96.50 (Fibonacci 50%) but then rolled back due to today’s news of the Australian trade balance deficit. In the medium-term uptrend will continue. Next resistance levels are 97.20 and 97.80 (Fibonacci 61.8%).
On the daily chart the indicators OsMA and Stochastic show long positions; while on the four-hour chart they recommend to open short positions. It is advisable to wait until OsMA histogram starts to rise and goes to the positive zone above the zero line.
Support levels: 93.45, 93.85, 94.60 and 95.10
Resistance levels: 96.50, 97.20 and 97.80
It is recommended to open long positions from the levels of 95.80, 95.10 and 94.60 and the targets of 96.50, 97.20 and 97.80. If current trend continues the pair will go to the lows of the year at 90.75–89.35.