AUD/JPY has 70.00 in its Crosshairs as Coronavirus Fears Continue

If negative headlines continue regarding the coronavirus, this pair may lead the way.

FOREX 3

After yesterday’s bloodbath in the equity markets due to coronavirus fears and the selloff in XXX/JPY after recoupling with stocks, where does that leave the Australian Dollar?  Australia’s economy is closely tied to that of Chinas.  As output from China continues to slow, demand for goods and services China needs from Australia will slow, which will lead to a lower price of the Australian Dollar.  AUD/USD has already been under pressure, as price came within 10 pips of our target from the triangle breakdown and the 127.2% Fibonacci extension from the lows on September 30th, 2019 to the highs on December 31st near .6878.

Source: Tradingview, City Index

With AUD/USD moving lower, and USD/JPY moving lower, what does that mean for the cross currency, AUD/JPY? One would think this pair may be “The worst of the worst”.  The pair had had broken lower out of the rising wedge and below the 200 Day Moving Average on January 24th.  When the it reopened on January 27th, price gapped lowed and moved to support hear 72.50. After filling the gap last week, price is currently testing the lows at 72.50, which was the 61.8% retracement from the August 26th , 2019 lows to the December 27th highs.   If price breaks through here, it could quickly move down to 70.00 which is the target from the breakdown of the rising wedge, which is 250 pips lower.

 Source: Tradingview, City Index

Let’s not get too ahead of ourselves just yet.  On a 240-minute time frame, AUD/JPY has been in a flag formation since January 16th from 76.32 down to 72.47 on January 31st.  After retracing 50% of that move, price is once again testing the lows and could potentially break lower out of the flag formation.  The minimum price target for the breakdown of the flag is 70.75. 

 Source: Tradingview, City Index

70.75 is the first target from the breakdown of the flag formation and 70.00 is the next target from the rising wedge formation.  If more and more negative headlines come out regarding the spread in the number of cases and deaths of the coronavirus, this pair may lead the way. 


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.