Strategy
Sell 79.50 with a stop at 82.50 for 73.50
Technical View
The rally from the low of 77.88 was capped by the Fibonacci 50% correction point of the decline from 85.79 to the low of 77.88 at 82.01. This could be a sign that the rally was a corrective rally. A bearish Star candlestick price pattern also hints of a possible price high and a likely reversal. Since the high at 82.01, price has been on a decline and we think this decline is likely to break the low at 77.88. The decline is likely to move lower to 73.20 in the next 3-4 month ahead.
Stochastic is on a decline and is near to the oversold zone but MACD is about to turn bearish and is hinting of a bearish price trend ahead. 20EMA is pointing lower with a steep slope which is a hint of a strong bearish price trend ahead.
Fundamental View
In the current market environment, investors’ sentiment is rattled by potential contagion from China Evergrande Group. All eyes are now on whether China Evergrande Group will default on its bond interest repayment, with a deadline for an $83.5 million interest payment on one of its bonds due on this Thursday. The AUD/JPY has weakened as a result. The Japanese yen is a safe haven which is sought after when the financial market worries are high and as investors seeks solace in safe haven. The Aussie dollar on the other hand is a proxy for the China yuan. The yuan weakened as far as 6.4879 on Monday for the first time since Aug. 23 on worries that a default from Evergrande could cause a global financial crisis. The Aussie dollar touches a 4-week low at 0.7219. Risk is likely to increase if Evergrande is unable to make repayment to its debtors. This is likely to drag the AUD/JPY lower.
There is also uncertainty on the US tapering. This is also likely to increase market risk which is likely to send investors seeking the safe haven yen against the risky Aussie dollar.