AUD/JPY at a tipping point for a potential bearish reversal

AUD/JPY bulls are getting exhausted below 75.40.

Short-term technical outlook on AUD/JPY

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 75.40

Supports: 74.35, 74.00 & 73.30/10

Next resistance: 76.26

Directional Bias (1 to 3 weeks)

The current 360+ pips of rally seen on the AUD/JPY cross pair from 71.71 low of 03 Oct 2019 has reached a tipping point for a potential bearish reversal at least in the short-term. Bearish bias below 75.40 key short-term pivotal resistance for a potential push down to target the next near-term supports at 74.35 and 74.00. A break below 74.00 sees a further slide towards 73.30/10 next (the “Ascending Wedge” support & 61.8% Fibonacci retracement of the recent up move from 03 Oct low to 05 Nov 2019 high).

However, a clearance with an hourly close above 75.40 sees an extension of the corrective rally to probe the next intermediate resistance at 76.26 (swing high areas of 30 May/22 Jul 2019).

Key elements

  • The current up move has reached the 75.40 upper limit/resistance of a medium-term bearish “Ascending Wedge” range configuration in place since 26 Aug 2019 low of 69.97.
  • An “Ascending Wedge” range configuration is considered as a potential bearish reversal pattern where the up move evolution inside the “Ascending Wedge” is considered “corrective/dead cat rebound” as the magnitude/slope of the “higher highs” (the upper boundary of the Ascending Wedge) is lesser than the magnitude/slope of the “higher lows”.
  • In conjunction, when the latest price action has formed a latest pair of “higher highs” on 31 Oct and 05 Nov 2019, the daily RSI oscillator has formed an opposite movement (“lower highs” – bearish divergence) at its overbought region. These observations suggest that medium-term upside momentum of price action has started to wane which increases the odds of a bearish reversal.
  • The 75.40 “Ascending Wedge” resistance also confluences with the former swing low area of the 03 Jan 2019 flash crash and a Fibonacci retracement/expansion cluster.  

Charts are from eSignal

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