AUDJPY: central bank watch!


Best analysis

The Reserve Bank of Australia releases its minutes from its policy meeting earlier this month at 0130GMT (1130AEST) today. At this meeting the board decided to cut the official cash rate to a record low 2.00% from 2.25%, noting that “the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce encouraging trends in household demand.”

However, the bank didn’t augment its trademark assault on the exchange rate or provide any real indication that it’s considering loosening monetary policy further. This, combined with some well placed orders, led to a rally in the Australian dollar on the back of the policy meeting. The RBA undid some of this strength when it released its quarterly Monetary Policy statement, in which it cut its growth and inflation forecasts, but the damage was already done; the Australian dollar had been freed by the notion of stable interest rates in Australia.

The RBA may attempt to put the cat back in the bag in its meeting minutes by reintroducing an explicit easing bias. However, we think it’s more likely that the bank will introduce an implicit easing bias, which could still be enough to sink the Australia dollar especially if it ramps-up its verbal assault on the currency. If it does nothing it would likely encourage AUD bulls that are already feeding off the RBA’s return to an outright wait-and-see mode, a recent resurgence in iron ore prices and some widespread US dollar weakness. In this environment we can see the need for the RBA to reintroduce an implicit easing bias, with particular focus on the Australian dollar. Even the aussie’s recent weakness – AUDUSD is back below 0.800 - isn’t going to be enough to satisfy the RBA.

Japanese GDP data and the BoJ

Later in the week, Japan’s Q1 GDP numbers are due and then there’s a policy meeting at the BoJ. While the bank is broadly expected to maintain its current easing plans, there is a chance, however slim, that it may introduce more stimulus at this meeting (see our BOJ preview later in the week). If the bank pumps even more liquidity into the economy it may result in another widespread yen sell-off. However, this isn’t our base case unless tomorrow’s GDP numbers disappoint. At present, the economy is expected to have expanded 0.4% q/q and 1.6% annualised last quarter. This would be a slight improvement on the prior month’s 1.5% annualised expansion.

Technical warnings for AUDJPY

There are some indications that AUDJPY’s recent push lower may be more than a simple correction within its long-term upward trend. For instance, there’s a bearish divergence between price and RSI on 4hr chart, indicating that momentum may be stalling. While it may be too early to get bearish on the pair, if it breaks out of its upward trend, possibly due to the reintroduction of an easing bias at the RBA, then we would turn bearish on AUDJPY, although this assumes tomorrow’s Japanese GDP numbers don’t disappoint and the BoJ behaves as expected on Friday.

Chart

Source: FOREX.com

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD extends recovery toward 0.6800 in Asian trading on Thursday, despite mixed Australian employment data. The Aussie cheers a return of risk appetite, which weighs on the post-Fed US Dollar recovery. All eyes now remain on US economic data for fresh impetus. 

AUD/USD News
USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD/JPY is attacking 143.00 in Thursday's Asian session, reversing sharply from 144.00. The pair pares back gains in tandem with the US Dollar, as the latter's post-Fed recovery falters due to a rebound in risk sentiment. The focus is next on the US data due later today and Friday's BoJ decision. 

USD/JPY News
Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price attracts some dip-buying during the Asian session on Thursday and seems to have stalled its retracement slide from the $2,600 mark, or a fresh all-time peak touched the previous day. The US dollar trims a part of its intraday gains to a one-week high, which turns out to be a key factor lending support to the commodity.

Gold News
Crypto leaders and Congress blast SEC over crypto regulations

Crypto leaders and Congress blast SEC over crypto regulations

In a meeting on Wednesday, several crypto leaders and congress members debunked the Securities and Exchange Commission's harsh regulatory approach toward the crypto industry.

Read more
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures