AUD/JPY: Sellers return post-downbeat Aussie data
|- AUD/JPY dropped to 79.15 after Australian building approvals slide past +1.8% market consensus to -8.4% in December.
- The housing market indicator recovered a bit from its -32.8% yearly slump in November to -22.5% in the final month of last year.
- Challenges to the RBA and JPY’s safe haven appeal signals AUD/JPY weakness.
The AUD/JPY trimmed 30 pips towards 79.15 after Australian building approval dropped to -8.4% from +1.8% market consensus in December. While monthly housing market indicator declined by -8.4%, there was a reduction of -22.5% compared to -32.8% on YoY basis.
With the headline inflation trading under the Reserve Bank of Australia (RBA) target, lack of recovery in housing market added to weakness into the Aussie. As a result, Japanese Yen (JPY) benefited from the Aussie weakness and surged to 79.15 just after the data release.
Given the challenges to RBA, TD securities say “The RBA commentary is likely to flag downgrades to GDP forecasts but for CPI forecasts to remain unchanged. Risk is for inflation to take longer to return to target.” As a result, the Aussie may have to bear the burden of unclear monetary policy signals. On the other hand, the JPY may take advantage of its safe haven appeal at the time of uncertainty surrounding Brexit and trade talks.
AUD/JPY Technical Levels
Technically, the 80.70 and the 81.25 are nearly resistances for the AUD/JPY if it manages to cross the 79.60 upside barrier. Alternatively, a month old ascending support-line, at 78.80, seem crucial support for the pair, breaking which can drag it to 78.00 and then to the 77.10 rest-points.
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