AUD/JPY looks for fresh direction to stays above 100-day SMA

• AUD/JPY struggles to hold on to recovery gains amid mixed trade sentiment.
• Brexit, phase one have been market’s catalysts off-late.
• Japan’s sentiment indices will decorate the economic calendar while the focus remains on the trade/political headlines.

AUD/JPY trades above three-month-old rising support line and 100-day SMA while taking rounds to 73.82 during early Monday morning Asia. Even so, the pair lacks the courage to clear the 200-day Simple Moving Average (SMA) as mixed signals from the key catalysts, like trade/Brexit, keep trades guessing.

While United States (US) President Donald Trump’s comments that a deal with China was 'potentially very close' could be considered as a trade positive indicator for the pair, the US-China tussle surrounding Hong Kong keep the fears on the cards. The reason being the latest statements from the US national security adviser Robert O'Brien that initial China trade deal is still possible but the US will not ignore events in Hong Kong.

Elsewhere, the United Kingdom’s (UK) ruling Conservatives have been leading the polls for the December election while the Tory manifesto, released over the weekend, promised trade benefits while holding Brexit bias. Though, downbeat British activity numbers keep the sentiment under check.

Read: Asia open: Recap of latest developments as risk-on tones emerge

With this, the US 10-year treasury yields take rounds to 1.77% while the S&P 500 Futures remain positive around 3,100.

Investors will now look forward to Japan’s September month Coincident Index and Leading Economic Index for fresh impulse. Both the sentiment numbers are likely to stay unchanged at 101 and 92.2 respectively.

Hong Kong district elections will take place today and the US has all the eyes on China to let it pass peacefully if not, risk sentiment could worsen and the safe-havens like the Japanese yen (JPY) will register gains.

Technical Analysis

FXStreet Analyst Ross J Burland cites multi-month-old support line and 38.2% Fibonacci retracement of August-November upside as the key support while stating the pair’s key trading juncture:

Trendline support is being respected at this juncture where the price meets the 38.2% Fibonacci retracement of the 26th Aug. - 7th Nov. range. However, it would not be uncommon for a test below the trendline at this juncture which would bring in 73 the figure prior to a re-run to the upside and prior trendline support level again. A high conviction trade, subsequently, could be if the price were to break the 73 handle on a second attempt, bears will be looking down the barrel to the October lows as a target at 71.73. However, the 61.8% Fibonacci would be an obstacle around 72.20 guarding a highly congested range between there and a figure lower to the 78.6% Fibo/ located around 71.20. On the flip side, bulls need a break above the 21-day moving average ad then a close or two through and beyond the 13th Sep. swing highs located at 74.49 with a confluence of the 23.6% Fibo of the aforementioned rage. The 200-day moving average is located at the latest swing highs of 75.67. A break of the July-Aug congestion/resistance of 76.28 opens risk fo 77.40, (Feb spike lows) ahead of 78.50 26th Oct 18 lows.