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  • AUD/JPY created a bearish inside day candle on Monday, signaling bullish exhaustion.  
  • The pair could test the ascending 10-day average support.  

AUD/JPY is at risk for a short-term pullback, having carved out a bearish inside day candle.  

That pattern occurs when the day begins with optimism but ends on a weak note and the trading range falls within the preceding day’s high and low.  

The bearish inside day has occurred near 7.5-month highs and indicates bullish exhaustion.  

Further, the 4-hour chart relative strength index has rolled over from the above-70 region (overbought levels) and has violated the ascending trendline, signaling scope for a correction.  

The pair risks falling to the ascending 10-day moving average (MA), currently at 75.72.  

A close above Monday’s high of 76.51 is needed to revive the bullish setup. At press time, the pair is trading at 76.20, representing marginal gains on the day.  

China’s NBS Manufacturing PMI printed above 50 for the second month in a row in December, signaling expansion. So far, however, the upbeat data has failed to put a bid under AUD/JPY.  

Daily chart

Trend: Pullback likely

Technical levels