AUDJPY has been rising steadily from the June 6 low of 81.77 to the key 87-handle today, making the short-term bias bullish. The market structure is bullish since prices are above the daily Ichimoku cloud and the Tenkan-sen line (red) is positively aligned. Additionally, prices are above the 200-day moving average which is sloping upwards, highlighting a positive picture.
Looking at the daily RSI, it has reached overbought levels just above 70. This suggests that upside momentum may weaken and the market could consolidate or pull back in the near term. However, while the RSI remains above 50 in bullish territory, the upside bias in the market is likely to remain intact.
The key 87.00 level is currently being tested and prices have pierced above this line which has provided strong resistance in the past few months. AUDJPY has not recorded a daily close above this level since March 16. Should prices close above it, then the February peak at 88.16 would be targeted.
Failure to close above 87.00 today, combined with an overextended market, could bring about a pullback in AUDJPY. Strong support is viewed at the 85.65 level. Below this level, further support comes into view at 84.76. A drop below it would weaken the short-term bullish bias and bring prices into the cloud.
In the longer-term picture, AUDJPY is neutral and has not shown a clear sense of direction since December 2016. The market needs to rise above 88.00 to give a more bullish outlook.
