Contrary to my initial assessment on the AUD/JPY during one of my previous posts here, the pair, instead of breaking down, has broken up from a bearish pennant or a symmetrical triangle formation. As you can see, the pair already cleared its 38.2% Fibonacci retracement level and at the 77.00 mark. It, however, could still encounter some resistance at the 50% and 61.8% Fib and the 79.00 psychological handle. Should the Aussie buying continues, it could reach for the 85.00 marker against the Japanese yen. On the flip side, if the AUD bears take control, the pair could once again fall back to its previous low of 71.892.
The rally in the higher yielding currencies like the Australian dollar was supported mainly by China’s ‘vote of confidence’ on the euro zone despite the regions ongoing battle with debt. China, in a report yesterday, denied that it was reviewing its positions in European assets. China’s denial sparked some risk taking in the markets which spilled over to the US trading session. The Dow Jones Industrial Average (^DJI) rose and closed with a 2.85% gain. The upbeat tone yesterday likewise continued in today’s trading in the Asia and Europe.
This positive sentiment on the market, however, could just be temporary as the news regarding China’s ‘support’ does not change the fiscal difficulties in the euro zone. Greece, alongside Portugal, Italy, and Spain, still has some debt problems to solve. Given this, it could just be a matter of time where we see another European debt drama episode that could send a lot of investors packing again. If and when this happens, the anti-dollar currencies like the euro and the Aussie could take a huge hit once more.