Australia just printed weaker than expected inflation data, dampening hopes for an RBA hike next month.
Can this spur triangle breakdown for AUD/JPY?
On the hourly time frame below, you can see that the pair formed lower highs and found support around the 95.50 minor psychological mark.
AUD/JPY 1-hour Forex Chart by TV
The pair is now testing the bottom of its descending triangle, possibly considering a break lower.
If that happens, AUD/JPY might be in for a selloff that’s the same height as the chart pattern, which spans close to 200 pips.
Nearby support levels at S1 (94.89) and S2 (93.86) might also serve as take-profit points for Aussie bears.
Technical signals are looking mixed for now, though.
The 100 SMA is below the 200 SMA to hint that the path of least resistance is to the downside or that support is more likely to break than to hold.
However, Stochastic seems ready to climb, so price might follow suit if bullish pressure picks up again.
Still, rallies might be capped around the triangle resistance, which lines up with the dynamic inflection points at the moving averages and the pivot point (96.28).
Recall that Australia just released a downbeat CPI report for May, as the annual reading slipped from 6.8% to 5.6% instead of hitting the consensus at 6.1%.
This might be enough reason for the RBA to sit on its hands during the July policy meeting, which is scheduled to take place next week. To top it off, the possibility of BOJ intervention when USD/JPY hits 145-150 might also be enough to keep a lid on the yen’s decline.
Do you think AUD/JPY is bound to break lower soon?
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