The Australian dollar has been in a swan dive since April as the trade war ramped up, housing worries intensified, global growth slowed, and the RBA cut rates.
It may have overshot. The late-July/early-August rout had some of the hallmarks of panic selling. The Aussie sentiment was already fragile, and the news of fresh tariffs hit it. During that time, AUD/USD fell in 11 straight sessions. That's not a balanced market.
After a dip to 70.00 two weeks ago, AUD/JPY finally found a footing in what was an impressive intraday turnaround following the RBA and news of US-China phone calls. The China news was mocked at the time as inconsequential, but it turned out to be a cautious signal because important meetings were announced this week.
As usual, the technicals were ahead of the move.
This week, the pair made a powerful move to the upside and took out the mid-August high in a four-day rally. That was probably the natural part. It relieved oversold conditions and shook out some weak hands.
Now is the tough part. The pair is 50-80 pips away from a series of strict levels including the June low, the downtrend, and the 100-day moving average.