ASX 200 Futures and AUD/JPY at Risk of Further Downside
The ASX 200 SPI futures broke a key support level, while the AUD/JPY tested its March 4 low. Both markets are experiencing sharp declines due to growing US recession fears and stretched asset valuations.
Markets on High Alert
Australia’s S&P/ASX 200 and AUD/JPY are considered economically sensitive markets, heavily exposed to shifts in investor risk appetite. It comes as no surprise that both currencies have been under pressure in the current macro environment. Price and momentum signals favor downside for both ASX 200 Futures and AUD/JPY.
Bears Rule the Day
Bears aggressively broke through the October 2022 uptrend in ASX 200 SPI futures, using the 200DMA as a guide. This downward trend was reinforced by a weak attempt to reclaim the uptrend on Monday, resulting in another sharp decline that started during the overnight session and extended into Tuesday.
Technical Analysis Points
- The price is wedged between minor supports at 7860 and 7796.
- The latter level represents the last notable support before 7600.
- RSI (14) and MACD are displaying bearish signals, but with RSI now oversold on the daily timeframe, the odds of a squeeze are increasing.
- A pause in price movements may become beneficial here.
Potential Sell Targets for ASX 200 Futures
If we see sustained downward pressure beneath 7796, traders can consider selling the market. Targeting a move to 7600 seems plausible. However, it’s essential to place stops above this level for protection against potential reversals.
Bottoming Signal Possibilities
When attempting to establish longs in response to a counter trend rally or squeeze. It could involve establishing positions between stop loss marks set around Monday’s low 7925 screens. Stops below 7796 would safeguard against continued bearish trends.
Further Downside for AUD/JPY?
AUD/JPY now faces the March swing low at 91.86. The steep unwind began after leaving a key bearish reversal candle at 94.65. RSI (14) and MACD continue to indicate strong sell signals, while oversold territory also poses potential squeeze risks but does not by itself justify ending selling until clear signs of an actual bottom establish themselves.
Potential Sell Targets for AUD/JPY
The break below this mark would create a setup for shorts established below it with stops above. Screens 90.27 is seen as a possible target if the downward momentum picks up strength.
Counter Trend Rally Possibility
If 91 holds its ground, traders might decide to change their current strategy and look at setting up long position over. Resistances may occur around 93.40 although 94.65 would make it less suitable in comparison.
