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AUDJPY: Will Price Break Above 107.8 Region?

The Australian dollar (AUD) rallied after surprising inflation data for May came in higher than expected. Australia’s annual inflation accelerated to 4.0% in May, up from 3.6% in April, surpassing the forecast of 3.8%. Core inflation also surged to 4.4%, marking its highest level in six months. The Reserve Bank of Australia (RBA) had already expressed concerns about inflation, and this spike increases the likelihood of another interest rate hike. Market expectations for an August rate hike jumped from 12% to 39%, and the futures market adjusted, eliminating the chance of a rate cut in 2024 and reducing the anticipated easing by the end of 2025.

AUDJPY – W1 Timeframe

On the weekly timeframe chart of AUDJPY, we can see that price has just reached the 100% Fibonacci expansion level of the previous swing. The measure of the Fibonacci expansion tool is shown clearly on the chart as the red dotted lines, while the purple horizontal lines mark the levels. Based on this, it is quite likely we get to see a reversal in the bullish price action on AUDJPY soon.

AUDJPY – H1 Timeframe

Based on the 100% expansion level on the weekly timeframe chart I have scaled down to the 1-hour timeframe in order to properly position for an entry. Since we already have a sentiment from the higher timeframe, we simply need to find an entry criteria on the lower timeframe. In this case, my entry criteria would be a breakout, and possible retest, of the wedge pattern as shown on the 1-hour chart here – you’d do well to wait for that as well.

Analyst’s Expectations:

  • Direction: Bearish
  • Target: 105.497
  • Invalidation: 106.820

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