AUD/JPY - Burden is on JPY bears to cut through 76.4% Fib hurdle of 86.60

Signs of bullish exhaustion in the AUD/USD pair despite upbeat China data means the responsibility to push the AUD/JPY cross above and beyond 86.60 (76.4% Fib R of Feb high - Apr low) levels rests with JPY bears.

The cross is currently trading flat on the day around 86.35 levels. The rally from the June 22 low of 83.73 ran out of steam on June 29 around 86.60 levels. June 29 high is 86.54 and June 30 is 86.50. The daily RSI is overbought. The price action has established 86.35 levels as a strong resistance. 

Focus on broader market sentiment & US ISM data

Yen selling may gather pace if the major equity indices across Europe respond positively to the upbeat China Caixin PMI numbers. Later in the day, a strong US ISM reading may lift the USD/JPY, although it may not help the AUD/JPY cross, given the backdrop of the horrible Aussie housing data and the technical exhaustion (Doji on AUD/USD chart).

AUD/JPY Technical Levels

Only a daily close above 86.60 (76.4% Fib) would signal the continuation of the rally from the June 22 low of 83.73 and could yield 87.48 (Mar 2 high + Mar 16 high). On the downside, breach of support at 85.97 (5-DMA) would open doors for 85.20 (Jan 31 low).