AUD/JPY outlook: key resistance levels in focus

We examine the recent price action and the outlook for the AUD/JPY currency pair.

The AUD/JPY currency pair last traded at 70.080, up some 0.09% for the session.

In the short-term, both the Japanese Yen and the Australian dollar have significantly rebounded from their March lows, as optimism returns to global markets.

At its most dour, the AUD/JPY currency pair traded at just 59.901, as markets became overrun by fear of the potential economic and health consequences of the coronavirus.

Elsewhere, the AUD/USD currency pair has also significantly recovered from its March lows, last trading at 0.65260, as commodity prices, particularly Iron Ore futures prices, remain elevated.

Overall, market optimism improved on Monday off the back of news of a potential Covid-19 vaccine as well as comments from US Fed Chair Jerome Powell that the world’s most powerful central bank wasn’t ‘out of ammunition’ to support the economy, where needed.

According to DailyFX analyst Rich Dvorak, Monday’s bullish activity in the AUD/USD came ‘as trader sentiment improved, and appetite for risk increased, which seemed largely catalyzed by the latest coronavirus vaccine headlines.’

AUD/JPY outlook: technicals in focus

Turning back to the AUD/JPY – which currently trades around the 70 yen range – IG’s Senior FX Strategist, Junichi Ishikawa recently wrote:

‘It is the Australian dollar yen (AUD / JPY) that can be expected to expand the fluctuation range in the cross yen. If the stock market trend continues in addition to the solid performance against the US dollar, we expect to break the 70.15 level, which is considered a resistance point. If you succeed in breaking this level, your next target will be a try in the 74 yen range.’

Yet there remains downside risk according to Mr Ishikawa, particularly as it relates to the potential emergence of a second wave Covid-19 outbreak. Here, it was noted that:

‘The biggest factor in the stock depreciation is the "Corona Second Wave". If this is fully taken into consideration, the Australian dollar yen will be a downside try due to the strong yen for risk aversion. In this case, the main focus is to maintain the 67-yen level, but if this level breaks down easily, I would like to be aware of the possibility of a 65-yen try.’

The Yen, though typically viewed as a safe-haven currency, faced significant selling pressure during the height of the coronavirus market panic in March.

Other key market moves

As of 2:13 AEDT, Gold futures traded 0.35% higher to US$1,740 per ounce; the ASX 200 benchmark was up 108 points or 1.99%, while the Australian VIX traded at 24.961.

As of 12:52 (GMT+9) the Japanese Nikkei 225 traded at 20,499 points, up 1.82%, or 366 points.

How to trade financial markets: long and short

What do you make of the current environment: do you see bullish or bearish opportunities? Whatever your opinion, you can trade indices, currencies and equities – both LONG or SHORT – with IG’s world-class trading platform now.

For example, to buy (long) or sell (short) the AUD/JPY, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘AUD/JPY’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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