The AUDJPY currency pair experienced a 0.4% contraction during the early Wednesday session, triggered by a series of soft Australian economic indicators. Tuesday’s retail sales data fell short at -2.7% month-over-month, reinforcing the belief that the RBA has concluded its tightening measures.
However, all eyes were on the recently unveiled inflation figures. The year-over-year number dropped from 5.4% to 4.1%, missing the expected 4.3% consensus on the downside. Additionally, the monthly CPI indicator declined from 4.3% to 3.4%, below the anticipated 3.7%. These results affirmed the perception that the RBA is unlikely to raise rates further and fuelled speculations of earlier rate cuts in 2024. This, in turn, led to a decrease in bond yields while the Australian 200 index climbed to reach new record highs.
Technical
On the 4H chart, a symmetrical triangle is in play, with the recent contraction teasing a breakdown at the dynamic support. However, a retracement is underway, which could determine whether a breakdown could be sustained in the upcoming sessions.
Using support at 96.934, the currency pair is retesting the breakdown level of the triangle. If the prior triangle support prevents an additional move higher, the breakdown could be sustained toward 96.814. If the selling pressure is maintained through the end of the week, the pair could trickle lower toward 96.706 and 96.510, where neckline support is established.
However, any movement above resistance at 97.127 could signal a fake-out. In this case, the currency pair could retrace its recent downturn toward the Fibonacci midpoint at 97.261 and the 61.8% Fibonacci golden ratio at 97.364, where it converges with the 25-SMA (green line) and 50-SMA (blue line).
Summary
Following the latest inflation miss from Australia, the AUDJPY currency pair has been under heavy selling pressure, teasing a breakdown at the symmetrical triangle. If the par can break down support at 96.934, the breakdown could be sustained into a new bearish trend.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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