The aussie is back on the back foot today as investors price-in a greater chance of monetary policy loosening from the Reserve Bank of Australia and as the yuan sinks against the US dollar. Bloomberg released a survey which outlined that most economists/market commentators believe that the RBA will lower the official cash rate on Tuesday. This encouraged aussie bears and pushed AUDUSD to its lowest level in a couple of days.
In Japan, economic data released earlier today was largely disappointing but not bad enough to materially change the yen’s push lower. Core consumer prices rose 2.2% y/y in January, missing an expected 2.3% gain and a prior figure of 2.5%. Also, household consumption fell more than expected at -5.1% y/y. The only real bright spot in today’s numbers was a surprisingly strong 4.0% jump in industrial production.
The yen largely brushed aside today’s figures as safe haven flows proved too strong, which when combined with AUD’s weakness saw AUDJPY reach an important medium-term trend line (see chart). Given our weak outlook for the Australian dollar and the softening techs of AUDJPY, it may only be a matter of time before this pair breaks through the aforementioned support line. However, a break through the top of its long-term downward channel would negate this bearish scenario.
Source: FOREX.com
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