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The Australian dollar rose further overnight after domestic consumer inflation data came out stronger-than-expected. CPI rose by 0.7% in the third quarter compared to 0.5% expected and 0.4% in Q2. After the post-data rally, the Aussie has been unable to climb further in the European session and the bullish run could end quickly if investors start to dislike risk, if, for example, concerns over U.S. elections, more disappointing corporate earnings cause global equities to retreat further or commodity prices tumble on the back of a rebound in US dollar. There is also the risk that the Reserve Bank of Australia may surprise the market with a dovish policy statement next week, despite the stronger CPI data. Among the most interesting Aussie pairs to watch is the AUD/JPY, for there is also some key Japanese data to consider at the end of this week and ahead of the Bank of Japan’s policy meeting next week.Ahead of all the above-mentioned fundamental events, the AUD/JPY has reached a key juncture: 0.8000-35. Around the 0.80 psychologically-important level, we have several other technical factors also converging, above all the 200-day moving average (80.15). This particular moving average has offered strong resistance in the past and is still pointing lower. There is also a bearish trend line to consider which has been in place for almost a year now. What’s more, this 0.80 area had been previously resistance, too. So, there are lots of reasons why the AUD/JPY could retreat from this level. If so, the bears would then like to see the breakdown of some key supports, starting with 78.85.But the bulls would argue that the recent trend has been bullish, as highlighted for example by AUD/JPY making higher highs and higher lows on smaller time frames. In addition, the 50-day moving average has started to point higher and price is holding above it currently. A convincing break above the 0.8000-35 resistance area is what is required for this group of market participants to become more vocal. If seen, we could then see the start of a more significant rally towards the Fibonacci levels shown on the chart.
