AUD/JPY - ‘Double Top’ reversal on the cards

Thursday’s failure around the July 20 high of 89.32 and a drop to 88.64 has opened doors for a ‘double top’ bearish reversal pattern on the AUD/JPY daily chart. The neckline support (87.65 - July 24 low) almost coincides with 87.62 - 23.6% Fib R of June 6 low - July 27 high. 

Core consumer inflation in Japan rose for a sixth straight month in June

The consumer price index (CPI) minus fresh food - a key proxy for core inflation - rose at an annualised 0.4% in June. Core inflation in Tokyo, a leading measure of nationwide price trends, edged up 0.2% vs. last month’s flat reading. Overall household spending jumped 2.3% y/y, beating the estimated rise of 0.6%. 

Meanwhile, BOJ ‘summary of opinions’ of the meeting held last week shows the board members do not see the need for additional easing. 

The upbeat data and the slightly hawkish tone of the BOJ summary of opinions could keep the Japanese Yen bid during the day ahead. The selling in the AUD/JPY cross may gather pace if the stock markets turn risk averse following 0.10% overnight drop in the S&P 500 index. 

AUD/JPY Technical Levels

The cross was last seen trading around 88.55 levels. A break below the previous day’s low of 88.34 would open up downside towards 88.00 (zero levels) and 87.62 (23.6% Fib R of 81.78-89.42). On the higher side, resistance is seen at 88.61 (Oct 2015 high) ahead of 88.87 (10-DMA on 4-hr) and 89.42 (previous day’s high).