AUD/JPY - 61.8% Fib offers support, risk reversals at 9-month high

• Sell-off in the AUD/JPY came to a halt at 61.8% Fib of Aug-Sep rally
• One-month risk reversals at 9-month high, indicate deteriorating put bias

The post-Aussie CPI sell-off in the AUD/JPY ran out of steam at 87.30 (61.8% fib retracement of Aug-Sep rally), opening doors for a technical recovery.

At the time of writing, the currency pair is trading at 87.60 levels. Week-on-week, AUD/JPY is down 1.17 percent.

The Aussie data released this Thursday morning showed the strong currency is indeed importing deflation. The import price index in the third quarter dropped 1.6 percent q/q, beating the estimated drop of 1.5%. Meanwhile, the drop in the export price index (3 percent) was much less than the expected drop of 6.3 percent.  The data has not had any impact on the AUD pairs.

Risk reversals at 9-month high

Despite Wednesday's sharp sell-off, the one-month risk reversals gauge rose to a nine-month high of -1.35. The recent low is -2.438 (Sep. 29 low). The sharp rise indicates fading put bias (improving call bias).

AUD/JPY Technical Levels

A break below 87.30 (61.8% fib retracement of Aug-Sep rally) would expose the upward sloping 100-DMA level of 87.17, under which a major support is lined up at 86.58 (76.4% Fib). On the higher side, a move above 87.88 (50-DMA) could yield re-test of 88.20-88.25 levels (5-DMA + 10-DMA).