The Australian dollar was initially supported in the Asia session by encouraging Australian business confidence figures, before deteriorating risk sentiment weighed heavily on the commodity currency. AUDUSD is now back to pre-confidence data levels and AUDJPY is testing an important trend line.
The sell-off in AUDJPY has also been helped by a widespread push towards the yen – USDJPY is testing a support zone just above 119.60. The strong yen and an weakening aussie can both be explained by a general deterioration in risk appetite. A recent strong rally in Hong Kong has slowed today, which is feeding into the entire region. All major equity markets in Asia are in the red at the time of writing.
What does price action say?
As long as this risk adverse environment remains it’s hard to see AUDJPY – the ultimate risk proxy – gaining much ground. Furthermore, if price breaks through the aforementioned trend line, it may compound the problem for AUDJPY. In this case the pair may quickly head towards another important support zone around 90.00. Beyond here we’re eyeing 88.35 and then 86.50, both of which are lows from 2014 and 2013 respectively.