AUDJPY beating a hasty retreat

The Aussie continues to suffer a meltdown as fundamentals are catching up with it. AUDJPY may have another ways to go before it finds support.

Despite the resilience of many of the major equity markets lately and the rush higher in gold prices, Aussie has been very weak over the last couple of weeks as other fundamentals have long been eroding the case for – like weak mining shares, collapsing iron ore prices, and an eroding interest rate advantage for Aussie longs. Overnight, we had a somewhat weaker than expected GDP report and there is considerable ongoing worry that China’s landing is proving a hard one.

For the AUDJPY cross, the above and particularly the resurgence of sovereign bond markets over the last couple of weeks has AUDJPY in a steep retreat, such that it has broken below the 80 level for the first time since late July, when it only closed below that level for a single day before rallying back into the range. This time, the sell-off may be deeper and the initial focus is on the lower edge of the Ichimoku cloud around 78.45.

Chart: AUDJPY
Note the importance of the 80 level and that Ichimoku cloud levels are often important points of support and resistance.