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AUD/JPY: Fake breakout of 96.00, bids at 50-dma pause reversal

FXStreet (Bali) - AUD/JPY failed to see follow through after breaking the 100-DMA above 96.00, with price reverting course from a high of 96.27 down towards 95.40 in early Asia, where the 50-DMA has now acted as dynamic support for a bounce of 20/30 pips.

The more hawkish-than-expected FOMC punished AUD/USD longs more than did USD/JPY shorts, translating into what may be seen as a fake breakout in AUD/JPY, with sellers now in need to re-claim levels below 95.00 to start putting the odds in their favour for a larger downward correction. On the upside, longs need a break and close above 96.30/50 region (lots of rejections around this level in the past) to allow more ambitious targets towards 97.00/97.20, area that aligns with the 76.4/78.6 fib retrac from the Sept - Oct slide.

In terms of sentiment, the pair has given a vigorous boost in recent weeks as mood in financial markets made a startling recovery. Going forward, the sustainability of the AUD/JPY rally will be dependent on the performance of US indexes (Nikkei in Asia), US-yields (look buoyant) and levels of volatility, with renewed increases a negative input to seek carry-trade strategies. It is also worth noting that at some point during Nov, Japan is expected to announce its new GPIF asset re-allocation, with the final composition to be closely monitored to increase order flow into Japanese stocks/yen substantially.

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