AUDJPY is testing the rising trend line support connecting the lows of price action since mid-June. A bounce could take it up to the next resistance levels marked by the Fibonacci extension tool.

The 38.2% level is just slightly above the 76.00 major psychological level while the 50% level is at 76.37. The 61.8% Fib lines up with the swing high at 76.71 then the 78.6% level is at 77.20. The full extension is at 77.81.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that the climb is more likely to gain traction than to reverse. Stochastic is also in the oversold region to signal exhaustion among sellers and a likely return in bullish momentum. A bullish divergence can also be seen as price made higher lows while stochastic had lower lows.

Volume is also elevated to reflect strong market interest while ADX is above 50 to signal trending market conditions.

The Aussie took hits as risk aversion returned late last week and sapped demand for higher-yielding currencies. Tensions between the US and China as consulates have been closed in Houston and Chengdu are on the rise, threatening to hurt commodity demand as well.

Australia has its quarterly CPI coming up this week and a 2% decline in price levels is eyed. Weaker than expected results could mean more downside for the currency while an upside surprise could spur a bounce.

There are no major reports due from the Japanese economy, which could leave the currency at the mercy of risk sentiment for the rest of the week. Other factors to watch out for include the FOMC statement, US advanced GDP, and Chinese PMI readings as downbeat figures could keep risk-off flows in play. On the other hand, positive data and an optimistic outlook could prove bullish for the higher-yielding Aussie.