- The Australian dollar fell against the Japanese yen, down 0.77%.
- Market sentiment has improved on the session, but in the forex market safe haven pairs are higher.
- AUD/JPY bears expect a weekly/Friday close below 80.70, which would increase the chances of a drop towards 78.78.
On Friday, as the North American session progresses, the AUD/JPY it falls about 100 pips on the day. At the time of writing this article, it trades at 80.47. Risk-sensitive currencies such as the Australian and New Zealand dollars extended their decline against the Japanese yen for the second day in a row, since Wednesday, when the Federal Reserve officially signaled it would raise rates “soon”.
AUD/JPY wavered on the announcement, though remained within familiar levels. However, when Fed Chairman Jerome Powell took the stage, he signaled that the US central bank could raise rates in March. The signal was clear to investors as risk aversion set in as market participants scrambled to find safer assets. In the FX complex, the flows went to the USD and JPY.
Meanwhile, US equities are trading in the green at press time, reflecting a slight improvement in appetite. However, month-end flows will keep the dollar and JPY ahead until next month.
In fundamental terms, AUD/JPY should head higher, based on central bank divergence. However, risk sentiment weighed on the Australian dollar. In addition, China’s economic slowdown and the People’s Bank of China (PBoC) rate cut indicate the communist party’s nervousness about the Asian giant’s economic prospects.
AUD/JPY Price Forecast: Technical Outlook
AUD/JPY represents the pair trending down. The daily moving averages (DMAs) are well above the price, around the range of 81.98 to 82.37. The break below the daily low of Jan 24 at 80.69, immediately exposed the low of Dec 20, 2021 at 80.27. A breakout of the latter could see the pair drop nearly 150 pips to the next support level located at 78.79, the daily low of Dec 3, 2021.