AUD/JPY - Strong base building at 61.8% Fib & bullish follow through

AUD/JPY daily chart shows a basing pattern at 87.30 (61.8% Fib R of Aug 11 low - Sep 21 high) followed by a bullish move above the 50-day moving average.

The currency pair remains well bid this Thusday morning above 87.70 levels, but is struggling to build momentum despite upbeat data releases in Australia.

Australia home loans rise for a fourth consecutive month in August

The data released by the Australian Bureau of Statistics showed home loans rose 1% in August, beating the estimate of 0.5% growth. July's growth was revised slightly lower to 2.8% from 2.9%. Meanwhile, the value of loans to investors rose 4.3% month on month in August, up from a 3.7% dip in July.

Yield differential stagnant

Despite the upbeat data, the AUD/JPY cross is struggling to extend gains above 87.70. This could be due to the stagnant Aussie-Japan 10-year bond yield spread (at 277 basis points; largely unchanged on the day).

AUD/JPY Technical Levels

A break above 88.88 (50% Fib + 10-DMA) would open doors for 88.22 (weekly 5-MA) and 88.35 (weekly 200-MA). On the downside, breach of support at 87.59 (50-DMA) could yield a sell-off to 87.30 (61.8% Fib) and 87.00 (zero levels).