AUDJPY has broken out of its recent upward trend ahead of a policy meeting at the Bank of Japan (BoJ). The bank is widely expected to leave policy unchanged, for now. Earlier this month Tokyo increased the sales tax in Japan to 8% from 5%, which could hinder the BoJ’s efforts to spur inflation. However, it’s too soon to see what the exact effects of the tax hike will be, hence despite some recent disappointing economic data out of Japan, the BoJ will likely opt to wait until it can assess the impact of the tax hike on the economy before possibly choosing to ease more aggressively.
Earlier today the Aussie took a hit after NAB’s business confidence index dropped to 4 in March, from 7. This is the second month in a row that business sentiment has deteriorated. Nonetheless, the fall in AUD didn’t break any major technical levels in AUDJPY or AUDUSD and we expect it will be largely shrugged off by the market in coming sessions. Thursday’s labour market report out of Australia is the event to watch this week for Aussie traders. As we stated yesterday, February’s employment report massively surprised to the upside, with over 80K full-time jobs being added over the month and over 47K jobs being added overall. Another strong employment report could see the market, and the RBA for that matter, become significantly less demoralized by the prospects of Australia’s labour market.
While AUDJPY has backed off its highs around 96.50, the pair is holding up fairly well. Price hasn’t retraced a technically significant amount, at least not yet, and the pair was in overbought territory, thus a small retraced isn’t anything to fear. However, if AUDJPY takes a bigger hit its worth keeping an eye on the Fibonacci levels below.
Source: FOREX.com
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