The AUD/JPY breakout is starting to look more like a fakeout
AUD/JPY threatens to fall back below the topside of its previous range
The pair has been ranging between 77.50 to 79.85 since mid-January up until we saw price broke out last Friday to climb to its highest levels this year. At the same time, price also broke above the 200-day MA (blue line) as buyers look to capitalise on the break but so far in the new week the pair has been nothing short of a disappointment.
Currently, price is lurking around the 80.00 handle but is threatening to fall back below the previous three-month topside range of 79.85. This comes as the aussie is weaker after the RBA minutes revealed the central bank discussing scenarios for rate cuts moving forward.
AUD/JPY is often seen as a barometer for risk sentiment in markets and the fact that US earnings season also begin mixed is leaving for an indecisive tone for risk assets to really rally thus far. Yesterday, Goldman Sachs and Citigroup reported beats on earnings but the details were less impressive as profit and revenue disappointed estimates.
If anything, this goes to show that any risk rallies will not be a given at this point and things can easily switch back if there aren't any positive headlines to bolster sentiment.
I reckon US-China trade talks progress will be the much needed impetus for risk assets to rally this quarter. However, the odds of any potential deal being wrapped up in the next few weeks look to be fleeting.
For a trade that promised much, this is starting to look more like a fakeout as other risk assets are failing to back up what currency traders have managed at the end of last week.