AUD/JPY: Bulls taking back control, eye R1 located at 77.80

• AUD/JPY has recovered virtually all of the flash crash losses, but remains vulnerable.
• AUD/JPY is currently trading at 75.67, back above its 21-hr SMA.

AUD/JPY was hammered overnight during a flash crash that sent the yen on a tear and the Aussie down to yearly lows. All it took was for  Apple to lower its guidance for Q1 to spark a Bear's feeding frenzy. The yen pairs were the worst hit, including GBP/JPY, but also TRY, ZAR and the Aussie as worst performers. 

Sino/US relations are key

AUD/USD has proven its vulnerability to a slow down in China, dented by the weak Caixin PMI and Apple's profit warning singling out weak sales of iPhones in China. Its fate will now very much depend on whether the US and China can put together a trade deal by March 1 - If they cannot, the Aussie is bound to be the fall guy and AUD/JPY can likely head lower so long as the BoJ doesn't step in to protect the level of the yen. On the flip side, should the two nations find a compromise, risk can rally and take the Aussie on a significant upside correction.

AUD/JPY levels

While the price has been able to reverse, the path is now clear to the 72 handle should there be another episode of risk aversion in the near future, meeting Aug 2016 lows. In the meantime, bulls need to get back above the pivot of 73.82, although RSI has turned in the favour of the upside accompanied by a neutralising MACD. On a meaningful reversal, R1 is located at 77.80 as a key target.