AUDJPY has delivered a significant technical development by breaking above the descending channel top that had been containing price action since early July, suggesting that a reversal from the extended downtrend could be materializing.
This breakout above the channel resistance around 97.30 indicates that buyers have finally gained enough momentum to shift the underlying trend dynamics.
Currently trading at 96.838, the pair appears to be in the early stages of a pullback following the initial breakout thrust, which is typical behavior as markets often retest broken resistance levels or seek nearby support zones before resuming the newly established uptrend.
The Fibonacci retracement tool reveals several potential support levels where dip buyers could emerge. The 38.2% retracement sits at 96.218, followed by the 50% level at 95.877, which coincides with the recent breakout zone and could serve as a key inflection point.
A deeper correction might reach the 61.8% Fibonacci at 95.536, though this would represent a more substantial pullback that could test the resolve of the emerging bullish sentiment.
The moving averages appear to be responding to the breakout, with the shorter-term indicators beginning to flatten and potentially setting up for a bullish crossover configuration. This technical development would further confirm the shift in momentum and provide additional support for the reversal thesis.
Stochastic readings suggest the recent rally has entered overbought territory, explaining the current pullback as profit-taking activity rather than a resumption of the broader downtrend. The oscillator has room to decline toward neutral levels, indicating the correction could extend further before buyers re-emerge.
RSI also reflects the recent strength but shows signs of cooling off, supporting the pullback scenario while maintaining a constructive bias above the midpoint level.
If any of the Fibonacci support levels can halt the correction, AUDJPY could resume its climb toward testing higher resistance levels around the psychological 98.00 area. Strong CPI and GDP have worked in favor of the Australian dollar while falling JGB yields are weighing on JPY.