AUD/JPY breaks the rising trend line, points to risk aversion

AUD/JPY has breached the supported offered by the trend line sloping upwards from the June 6 low and June 24 low, suggesting tough times for the risk assets during the day ahead. 

The Japanese Yen remains bid, extending the late Friday’s spike, while the Aussie is being offered today as markets take note of the heightened geopolitical tensions in the Korean peninsula. The data released today showed the Japanese industrial production rose less than expected, but failed to have any impact on the pairs. 

Risk aversion ahead?

The drop in the AUD/JPY is usually an advance indicator of risk aversion in the markets. Major Asian indices are trading directionless as geopolitical tensions overshadow Friday’s upbeat US GDP release. S&P 500 futures are down 0.15%. DAX and FTSE 100 futures are down 0.11% and 0.26%, respectively. 

Markets are expected to keep an eye on the developments in the Korean peninsula. 

AUD/JPY Technical Levels

The cross dipped to a low of 87.93 in Asia. On the 1-hour chart, we see the head and shoulders breakdown. On the 4-hour chart, the RSI has turned bearish. A break below 87.89 (4-hour 100-MA) would expose 87.65 (double top neckline). An end of the day close below the same would confirm the bearish reversal and open doors for 86.50 (38.2% Fib R of 81.78-59.42). 
On the higher side, resistance is seen at 88.20 (rising trend line hurdle) ahead of 88.56 (4-hour 50-MA) and 88.83 (Friday’s high).