Surges above the 93.20 area following BoJ news ,PBoC’s rate cut

• AUD/JPY remains on the defensive above the 93.20 mark following BoJ news, PBoC 10 basis point (bps) rate cut.
• The cross trades within a descending trend channel line from the middle of June on the four-hour chart.
• The first resistance level for AUD/JPY emerges at 93.70; the initial support level at 92.80.

The AUD/JPY cross edges higher to the 93.28 mark during the Asian trading hours on Monday. The cross bounces off the 92.83 low following the Bank of Japan (BoJ) news and Chinese central bank rate cut.

That said, the BoJ will purchase Japanese Government Bonds (JBS) at a fixed rate for an unlimited quantity (Residual maturity of 5YR to 10YR) outright from August 22, according to Bloomberg. Furthermore, the People’s Bank of China (PBoC) decided to cut the one-year Loan Prime Rate (LPR) by 10 basis points (bps) to 3.45% from 3.55% and maintained the five-year LPR unchanged at 4.2%.

From a technical perspective, AUD/JPY trades within a descending trend channel line from the middle of June on the four-hour chart. That said, the path of least resistance for the AUD/JPY is to the downside as the cross holds below the 50- and 100-hour Exponential Moving Averages (EMAs). It’s worth noting that the Relative Strength Index (RSI) holds below 50, supporting the sellers for now.

The first resistance level for AUD/JPY emerges at 93.70 (50-hour EMA). The key barrier is located at 94.00, portraying a confluence of the 100-hour EMA and a psychological round figure. The additional upside filter to watch is 94.60 (the upper boundary of a descending trend channel). Any meaningful follow-through buying above the latter will see a rally to 94.90 (high of August 9) en route to 95.40 (high of July 14).

On the flip side, the cross will meet the initial support level at 92.80 (low of August 18). The next downside stop appears at 92.55 (low of July 88), followed by 92.15 (low of June 6). A breach of the latter will see a drop to 91.60 (the lower limit of a descending trend channel).

AUD/JPY four-hour chart