- AUD/JPY recovers from weekly low, pares intraday losses during three-day downtrend.
- 50% Fibonacci retracement level, nearly oversold RSI challenges further downside.
- Australia trade numbers for March came in firmer, China Caixin Manufacturing PMI for April disappoints.
- Convergence of 50-SMA, 100-SMA and one-week-old previous support line guards immediate upside.
AUD/JPY picks up bids to pare intraday gains around the weekly low as traders cheer strong Aussie foreign trade numbers while paying little heed to China activity data on early Thursday. In doing so, the cross-currency pair prints mild losses near 89.80 during a three-day losing streak.
That said, China’s Caixin Manufacturing PMI for April drops to 49.5 versus 50.3 expected and 50.0 prior. Earlier in the week, the NBS Manufacturing PMI for the dragon nation offered a negative surprise before the Chinese markets went on a long holiday until Thursday.
On the other hand, Australia’s headline Trade Balance rose to 15,269M in April versus 12,650M market forecast and 13,870 prior. Further, Exports and Imports also improved to 4.0% and 2.0% versus -3.0% and -9.0% respective priors.
As a result, the Aussie data helps the AUD/JPY price to rebound from a 50% Fibonacci retracement of the pair’s run-up from late March to early May, backed by nearly oversold RSI (14).
However, downbeat China PMI data and convergence of the 100-SMA and 50-SMA join the bearish MACD signals to challenge the pair buyers near 89.75-85 resistance confluence.
Even if the quote rises past 89.85 hurdle, the 90.00 round figure and April 20 swing high of near 90.80 can restrict the AUD/JPY pair’s further advances.
Meanwhile, 50% and 61.8% Fibonacci retracements can limit the short-term downside of the AUD/JPY pair near 89.30 and 88.50 levels in that order.
Following that, an upward-sloping support line from early April, near the 88.00 threshold, will be crucial to watch for the pair sellers.
AUD/JPY: Four-hour chart
Trend: Pullback expected
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The AUD/JPY currency pair has remained resilient heading into the weekend as the pair prods the 89.75-85 hurdle amid strong Aussie trade numbers and a downbeat China Purchasing Managers’ Index (PMI).
The Australian dollar benefited from an impressive set of trade numbers released Friday that revealed an unexpectedly large surplus of 1144 million Aussie dollars for the month of December. This beat the average forecast of 828 million Aussie dollars and was the first positive surplus in 7 months.
The surge of exports was mainly driven by strong gains in iron ore prices and increased Chinese imports, as demand for Australia’s resources continues to boom.
However, the optimism was somewhat dampened by the release of a downbeat China PMI report. The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 51.1 in December, down from 51.7 in November, while the non-manufacturing PMI decreased to 54.4 vs. 54.8 the month before.
The downbeat numbers indicate a slowdown in China’s manufacturing sector, and this could weigh on AUD/JPY, as Japan is a major export partner of China and a disruption in economic activity could hurt Japanese exports.
Looking at technicals, the AUD/JPY pair has been trading in a range, prodding the 89.75-85 support level. If the pair falls below the support level, then we could start to see the downside pressure in the pair.
Overall, the pair’s outlook is bearish. Though the strong Aussie trade numbers offer a boost to the currency pair, the negative sentiment from the downbeat China PMI data could take precedence.
