AUD/JPY, a global gauge of risk perception in the FX market, is flashing ominous signals of a potential retreat, which could reflect broader investor concerns.
Tied closely to the S&P 500, AUD/JPY has generated overbought signals that could erase this month's gains if it fails to clear last week's high soon.
Friday's 80.91 trend high drove weekly RSIs to their most overbought since 2016 and daily RSIs to their highest since June.
Friday's highs probed 2019's high, 2017's low and the upper 10-week Bolli, while approaching the monthly cloud base that capped rallies the last five years.
Monday and Tuesday's trading ranges are wholly below the upper 21-day Bolli, increasing the risk of a reversion down to the rising 21-day mean, last at 79.17.
That's near this year's 78.86 low, the 38.2% Fibo of the advance from Nov.
19's pullback low at 78.80, December range highs and the daily kijun at 78.89.
The 61.8% Fibo at 77.50 is by the Dec.
21 spike low and Dec.
2-7 highs, with current support from the lower 21-day Bolli and 55-day moving average.
But a drop to there would require the positively correlated S&P 500 to retreat significantly.
Potential causes for that abound, from rising Treasury yields, speculation about Fed tapering and a failure of the vaccine-led recovery to live up to lofty expectations nL1N2JJ28NnL1N2JM0GR.
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