AUD/JPY Trapped in 500-Point Channel

AUD/JPY has been trading in a narrow range of 500 points on Friday, with the Aussie dollar slightly positive against the yen.

According to technical analyst Christopher Lewis, this market is currently sitting at the middle of this range, just three pips below the center line. He notes that it's interesting to see how the market has stopped here, which could be a sign that it's turning around, but they will have to wait and see.

At this point, Lewis views it as a binary trade: if the AUD/JPY breaks above the current candlestick, it may go back to the top of the range; if it breaks down below, it could go to the bottom.

The bottom of the range is at 110 yen level, with the 200-day EMA sitting there. However, Lewis believes that even if the Bank of Japan raises rates, it will be light years behind other central banks in terms of interest rate hikes due to its high debt load. He thinks this market could find its way much higher over time.

However, if the AUD/JPY breaks down below 110 yen level, Lewis' thesis would change completely, and he suspects that at that point, the Japanese yen will strengthen against almost everything else.