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  • AUD/JPY is currently trading at 79.33, between a high of 79.56 and a low of 79.03.  
  • Risk sentiment has turned sour and that is supportive of the yen.
  • USD/JPY dropped below the pivot as stocks crumbled.  

The mood on Wall Street flipped over mid-session with the benchmark’s turning heavily negative, albeit stablsiing off their lows, so far. AUD/JPY is the FX space’s risk barometer and at times such as this, the bears pick up the baton. When you throw in some doubts over trade talk breakthroughs, the Aussie will take the brunt of it.

There have been some concerns raised in today’s session, despite upbeat news from the weekend with respect to China’s and the US trade talk progress which will potentially weigh on the cross should the positive sentiment continue to deteriorate. The bar is high for structural reforms as we move into the nitty-gritty of the detail to a deal. Markets fear that the US requirements may be too onerous on the Chinese who are not very forthcoming when it comes to regulations around compliance checks – To what extent will Chinese keep their promises, on say, intellectual property, if tariffs are taken off is what the markets are asking?

Dollar taking on  H&S neckline resistance at 96.60/70

Meanwhile, the dollar has picked up a bid to the H&S neckline in the DXY ahead of an expected solid US labour data report this week, contrasting with what is expected to be a dovish ECB meeting and a downward revision to the euro area’s macroeconomic projections – This too should weigh on the Aussie.

AUD/JPY levels

Conditions for a short have thus started to kick in with the yen catching a US session risk-off bid. The cross is on the verge of an extended downside run below the pivot, trendline support between 28th Feb and earlier fractal European lows as well as the Ichimoku Cloud on the hourly charts and the 23.6% Fibo retracement of early Feb swing lows to late Feb swing highs. Additionally, the lagging span and price are now both below the cloud with a bearish cloud formation in development and the Tenken-sen greater than the Kijun-sen. S1 is located at 78.91 has confluence with the 38.2% Fibo of same range as the first key support target, in line with the late Feb fractal lows. A break of that confluence opens S2 at 78.70 and S3 at 78.36.