AUD/JPY: Bottom in place?

• Off 16-month low, creates bullish RSI divergence.
• RBA minutes ignored, focus on the equity markets.  

Having recovered from the 16-month low of 81.26 yesterday, AUD/JPY is trading marginally weak at 81.80 in Asia.

The RBA minutes released a few minutes ago did not produce any surprise, though the central bank's concerns over the high level of the household debt could keep Aussie bulls at the bay.

Bullish divergence

The currency pair has created a bullish relative strength index (RSI) divergence on the daily chart, signaling the pair may be close to bottoming out. The bullish divergence occurs when the RSI diverges (creates higher lows) in response to lower lows on the price chart.

However, the turmoil in the equity markets is far from over as the fears of US-China trade war, faster Fed tightening will likely keep bond yields elevated. Consequently, the AUD/JPY cross may find it hard to capitalize on the bullish RSI divergence.

AUD/JPY Technical Levels

A clear break above 82.01 (March 7 low) would add credence to the bullish RSI divergence and will likely yield a rally to 82.90 (10-day moving average) and 83.12 (21-day MA). On the downside, breach of support at 81.49 (March 5 low) would open doors for re-test of 81.26 (March 19 low) and 81.00 (psychological level).