- The oversold AUD/JPY is witnessing a minor relief rally in Asia.
- Growing trade war concerns and risk aversion in stocks favor the downside in the pair.
- The pair is on track for the sixth straight weekly loss.
AUD/JPY, the regional risk barometer, is mildly bid in Asia despite the growing fears of a full-blown global trade war and risk aversion in equities.
As of writing, the cross is trading at 82.46 – up 0.40 percent from the overnight low of 82.16. The minor recovery could be associated with oversold conditions showed by the daily relative strength index (RSI).
Still, the pair look set to end lower for the sixth straight week, given it is trading at least 120 pips below the last week’s close of 83.75. Moreover, a 120 pip rally is easier said than done as Trump’s decision to impose steep tariffs on steel and aluminum imports, escalating tensions with China and other trading partners and rising prospects of higher inflation could keep the equities under pressure.
Consequently, the Japanese will likely find bids and the Aussie dollar may remain under pressure or could underperform Yen amid broad based USD weakness. So the minor corrective rally risks falling apart.
AUD/JPY Technical Levels
Acceptance above the initial hurdle at 83.05 (5-day MA) would expose resistance at 83.32 (Feb. 14 low) and 83.58 (10-day MA). On the downside, failure to hold above the Asian session low of 82.32 could yield a re-test of the previous day’s low of 82.13 and 82.00 (psychological level).