• The AUD/JPY stays in positive territory, bolstered by a dovish Bank of Japan stance.
• Risk aversion dominates the headlines as worries about recession and inflation increase.
• The AUD/JPY’s inability to reclaim 95.30 leaves the pair vulnerable to selling pressure.
• A break below 91.96 to send the AUD/JPY tumbling towards 90.10s.

The AUD/JPY advanced on Tuesday for the first day in the week though it remains below the 20-day EMA, which lies around 94.20, amidst a dampened market mood, courtesy of renewed fears of stagflation, meaning recession and inflation at the same time. At 93.98, the AUD/JPY begins the Asian session with minimal losses of 0.01% at the time of writing.

US equities finished with substantial losses due to portfolio rebalancing, as half/quarter/month-end flows dominated the markets. However, the AUD/JPY printed gains due to the dovish monetary policy stance by the Bank of Japan (BoJ), which is trying to anchor inflation above the 2% threshold.

On Tuesday, the AUD/JPY registered a daily low in the Asian session around 93.00 and rallied towards a June 22 swing low around 94.68. Nevertheless, buyers’ lack of strength to lift the cross-currency above 95.00 opened the door for selling pressure, as sellers entered around that area and dragged the pair towards the 94.00 mark.

AUD/JPY Daily chart

This time frame portrays the AUD/JPY trading within a rising wedge. Additional to that factor, which favors AUD sellers, it’s worth noting that the last two higher highs were lower than the YTD one, at around 96.88, suggesting that selling pressure is piling on the pair. Furthermore, the pair’s breaking below the 20-day EMA and the Relative Strength Index (RSI) is almost horizontal, but below the RSI’s 7-day SMA might pave the way for further losses.

If that scenario plays out, the AUD/JPY first support would be the June 23 daily low at 92.64. Once cleared, the next support would be the 50-day EMA at 92.42. A breach of the latter would expose the June 16 daily low at 91.96, which, once cleared, will send the pair tumbling towards the 100-day EMA at 90.18.

AUD/JPY Key Technical Levels