Market highlights from the last week

Friday 15th May: The Australian dollar came under renewed selling pressure on Friday amid increased fears over the global economic outlook after a slide in US retail sales and AUD/USD retreated to lows near 0.6400

Monday 18th May: Risk appetite strengthened sharply during Monday with increased optimism over the global outlook and hopes for positive moves towards a coronavirus vaccine

Tuesday 19th May: The Australian dollar maintained a robust tone during Tuesday with further support from firm risk appetite and a fragile US dollar

Wednesday 20th May: The data overall dampened confidence and risk appetite was also weaker amid US-China tensions as well as tensions between Australia and China. AUD/USD retreated to 0.6550 before settling around 0.6565.

Thursday 21st May: Fitch confirmed the Australian AAA credit rating, but the outlook was changed to negative from stable due to the coronavirus impact on public finances

AUD/JPY Price Analysis

Let us have a look at the technical viewpoint.

Monthly: AUD/JPY traded to a multi-year low of 59.87 in March, although buying later in the month resulted in the majority of the initial selloff being recaptured. Continued upward momentum in May only managed to post an Inside Bar, highlighting the lack of momentum in the rally

Weekly: Broken through the 0.618% pullback level of 70.17. Sellers have appeared above 70.58. This was support from the 31st Dec 2018, its now becomes resistance.

Daily: Looks to be forming an Ending wedge pattern that has a bias to break to the downside. Trend line resistance is seen at 71.24, support at 69.30. A break of support and the measured move target is 64.40. Support is also noted at 67.62

Intraday 1-hour: With a firmer tone is risk appetite in the US markets on Friday, the cross made a minor recovery. An intraday 261.8% extension level is located at 70.86, close to the previous swing high of 70.92.

Outlook: The wedge formation offers a downward bias. There is scope for further intraday buying pressure, but gains should be limited and capped inside the formation.

Possible trade setup

Action: Selling at 70.85

Stop: 71.50 (outside the wedge)

Targets: 67.62 and 64.40

Potential return on risk to first target:  R4.9 (reward 323 / risk 65)

Risk Warning - Your capital is at risk - Losses can exceed deposits

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