AUDJPY is in the process of retracing some of the ground it lost in September and early October. The demise of the pair came from pressure from both sides of the equation. The yen became the currency of choice as investors began to question the USD strength story and global growth fears were brought to the forefront of market sentiment. In Australia, the notion of prolonged below –trend growth due to subdued investment in non-resource parts of the economy is hanging over the aussie.
Given this fundamental backdrop, can AUDJPY rally? The pair’s most recent push higher appears to be on the bank of reports that the BoJ is questioning its ability to hold real inflation above 1% in the near-term, given the massive fall in oil prices. Considering that Japan is the second largest net importer of fossil fuels, it’s easy to understand why the BoJ is nervous.
From a technical perspective, AUDJPY has managed to break through its 200-day SMA and is now testing an important resistance zone around 95.00. There are some technical indicators that suggest the pair may have the legs to push even higher. There is a bullish crossover in daily MACD and the pair recently bounced off the base of its long-term upward trend, thus it may make its way to the top of its trading channel. We’re keeping a close eye on the pair’s Fibonacci retracement levels.
Source: FOREX.com
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