AUD/JPY on a knife’s edge within daily bearish channel

• AUD/JPY on a knife edge with bears lining up for a break below  23.6% retracement Fib.
• Big week ahead with RBA, FOMC and midterms.  

AUD/JPY is heavy around the pivot although USD/JPY is holding the 113 handle nicely, supporting the upside bias.

• USD/JPY: bulls stay on top of 113 handle
• BoJ’s Kuroda: Large deflation policy no longer most appropriate.

AUD/USD, however, has made a strong advance and running out of fuel. The week ahead should be interesting for the pair considering we have the US midterms, FOMC and the RBA all lined up. The yen is likely to catch a bid on uncertainties and with the stock market as wobbly and fickle as it has been of late, the cross will track sentiment surrounding the events.

The Big three events

• Key events ahead: RBA and US mid terms are key – Westpac

With respect to the FOMC and RBA, the markets are not expecting much in the way of new details and for both to stay on hold, but the midterm elections are definitely a major risk for financial markets. The sentiment is that Democrats are likely to take control of the House while Republicans are likely to retain control of the Senate. Such an outcome could affect consumer confidence and dent the dollar and risk, putting downside pressure on the cross.  

AUD/JPY levels

AUD/JPY has been retracing the upside back towards the 23.6% Fibo with eyes on 80.50 as the first key target that has a confluence of the 38.2% fib and 200-$hr SMA. A break there will open risk 79.20 and then 78.50 target as the 26th Oct low. On the upside, R2 is located at 82.38 and R3 at 82.83. 83.93 guards a breakout of the descending daily channel.