AUD/JPY: watch the SPX & also Tue close

The AUD/JPY has been chopping along either side of the key 80 level for the last four weeks but more so just on the underside of this S/R region. However, tomorrows close is important as it will mark the end of the month and any close above 80 might give this pair a bit of a psychological boost. Watch also the fortunes, or otherwise, of the S&P500 because their paths are often linked.

A/J daily: note the 4-week chop along either side of the 80 level:

AJ4

A/J daily: price is conforming to a much larger triangle here as well and the bottom trend line is near this key 80 level:

AJdaily

A/J weekly: some indecision-style candles of late:

AJweekly

A/J monthly: all whole number levels have their influence over price action but the 80 is a major level for this pair. Also note the triangle support trend line that has been in place since late 2008:

AJmonthly

AUD/JPY and the S&P500: The A/J often, but not always, trades in tandem with the general risk appetite associated with the S&P500 and the following 15 year chart shows this high degree of correlation between the two:

A/J correlation with S&P500: note the high degree of correlation:

AJSPX

Part of this hesitation with the AUD/JPY over the last four weeks could be related to the hesitation that the S&P500 is experiencing at its major resistance level near 2,100 and this can be clearly seen in the following weekly chart of the index:

S&P500 weekly: the 2,100 level is a major resistance level for this index and ties in with a recent Flag trend line. Price action has tested this level over recent weeks with little success but any break and hold above this region could support a Bull Flag style breakout move:

S&Pweekly

Any break and hold by the S&P500 above this major 2,100 level could possibly underpin a move back above the 80 level for the AUD/JPY and this correlation needs to be noted and monitored. Conversely, a retreat from 2,100 by the S&P500 index could support a rejection by the AUD/JPY of this major 80 and support trend line level.

Summary: watch for how the S&P500 performs with its latest test of the key 2,100 level to help gauge the next major move on the AUD/JPY:

  • A break and hold above 2,100 by the S&P500 might support a bullish move above 80 for the AUD/JPY.
  • A rejection of 2,100 by the S&P500 might support a bearish move below 80 and trend line support for the AUD/JPY.

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