ASX 200, AUD/JPY: Looking vulnerable to downside as risk appetite wanes

With markets starting to question how many rate cuts we’ll see from major central banks this year, sentiment towards China’s economic outlook deteriorating rapidly and riskier asset classes coming under pressures, Thursday shapes up as an important session for Australia’s ASX 200 and the AUD/JPY which are threatening to break their respective uptrends from the rally that began late last year.

ASX 200 slices through upside support

You can see the perilous position the ASX 200 finds itself in on the four-hourly chart, breaking through uptrend support to test 7320, a resistance level it struggled to overcome last year. With little in the way of major visible support of the latter, a clean break of the latter could see the index slide towards 7190, a level that acted as both resistance and support in the early stages of the risk rally.

Alternatively, a bounce would likely see the index push back towards the intersection of uptrend and horizontal support located around 7360. Beyond, 7445 would be the next upside target.

Australia’s December jobs report due at 11.30am AEDT – where employment is expected to lift by 15,000 leaving the unemployment at 3.9% -- is one event traders need to keep an eye on. Another is how the market responds to BHP’s fourth quarter production report released before the start of trade. The largest constituent in the index reported iron ore production in Western Australia rose 5% from the prior quarter. Copper production increased 7% over the first half of FY 2024.

Externally, the performance of mainland Chinese equities may also be influential with Australia’s equity market sinking into negative territory on Wednesday as Chinese stocks tanked.

AUD/JPY risks may be skewed higher near-term

While not as dire as the ASX 200 picture, AUD/JPY is another market threatening to break the uptrend it’s been in since early December, hindered by significant weakness in the AUD/USD which has largely offset massive gains for the USD/JPY as yield differentials between the US and Japan widen yet again.

Sitting in an ascending triangle and having unsuccessfully broken lower despite several downside probes over the course of this week, the price action suggests the risks may be skewed higher in the near-term. A break of 97.14 may open the door to a test of the 2024 YTD high of 97.80. Below, AUD/JPY found buyers below 96.65 on several occasions this week. Should that demand dry up, the next downsides target would likely be 96.15 and 95.90.

While Australia’s employment report may cause short-term volatility, movements in US 2-year yields are likely to be highly influential given they not only driving movements in USD/JPY but also broader risk appetite. China’s equity market performance is another near-term factor to watch.

-- Written by David Scutt

Follow David on Twitter @scutty

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.