AUDJPY Bearish Divergence Could Bring Risk-Off Sentiment To The Fore

Nenad Kerkez

Commodities and Equities prices have rebounded from their interim lows of Early February 2016, and it has resulted with strong gains across these markets. Clearly this has been a risk-on scenario, causing AJ to be bullish during this period as well. Equities are reaching key resistance levels and are showing signs of market fatigue by the End of this Quarter and Month. This shows that risk-off sentiment may come back to the fore, meaning it could be a nice setup for a short position on AJ.

Technically 86.15-30 zone (now moment sellers, WPP, 50.0) is POC, and the pair should ideally be contained below the zone and below the trend line (blue with red rectangles). If h4 confirms the shooting star we may see more downside for the pair. We also have a bullish T-89 but what we also see is giant bearish divergence that additionally confirms my opinion about fundamental and technical outlook. The price is at 85.90 at the moment of writing this analysis. Now what we could also see is a possible spike to POC (because of bullish T-89 and general uptrend) towards 86.15-30 zone (now moment sellers, WPP, 50.0) where we could see possible sellers. The first target is 85.65 and only a 4h close below (or strong H1 momentum) will target 85.17.

Have in mind that this is a counter trend analysis due to above mentioned factors + divergence and if the pair goes above 86.70 the bearish outlook will become invalid.

AUDJPY Hourly Chart

AUDJPY Hourly Chart