Is AUD/JPY pointing to dead cat bounce in risk assets?

The recovery in the AUD/JPY pair, a global risk barometer, from the 11-week low of 84.81 ran out of steam in early Asia at 85.46, suggesting the relief in the risk assets seen in the overnight trade could be a dead cat bounce.

The Dollar-Yen pair closed below the key support of 111.60 (Feb low) on Wednesday, thus signaling a continuation of the retreat from the December high of 118.66. The Techies suggest the pair could test 110.00 levels over the next few days.

Meanwhile, the sharp recovery in the AUD/USD from the low of 0.7639 to 0.7675 was short lived. The AUD is being offered once again in Asia despite an overnight recovery in the copper prices. The currency pair is now down 0.27% at 0.7657 levels. Consequently, the AUD/JPY is on the back foot this Thursday morning and was seen trading around 85.25 levels.

The weakness in the AUD, a risk currency, despite overnight recovery and a bullish technical setup in the Japanese Yen suggests the broader market risk aversion could stay intact.

AUD/JPY Technical Levels

A breakdown of support at 85.09 (upward sloping 100-DMA) would expose 84.81 (previous day’s low) under which the losses could be extended to 84.55 (Jan 5 low). On the other hand, a break above 85.84 (Feb 27 low) could yield a revisit to 86.08 (5-DMA) and 86.50 (10-DMA).