AUD/JPY clings on to rising trend line support

Despite the dovish RBA statement, the AUD is holding up well vs. its low yielding Japanese counterpart.

On Tuesday, AUD/JPY successfully defended the support offered by the trend line sloping upwards from June 6 low and Aug 11 low. At press time, the currency pair is trading at 88.40 levels and the rising trend line is seen offering support at 88.36 levels.

Yield Differential favors Aussie

The RBA may be concerned about the negative impact of the AUD strength on the economy, however, that does not overshadow the fact that with the RBA, the consensus is for rates to move up, not down, from the current levels.

Meanwhile, the consensus is building at the BOJ that the economy may need another shot in the arm ahead of the 2019 sales tax hike. Clearly, the yield differential could continue to widen further in favor of the AUD.

As for today, the technical correction in the USD/JPY pair could weigh over the AUD/JPY cross.

AUD/JPY Technical Levels

A break above 88.67 [Sep 28 high] would expose resistance at 59.00 [zero levels] and 89.42 [July 27 high]. On the downside, breach of support at 88.36 [trend line support] would open doors for 88.00 [zero levels] and 87.66 [50-DMA].