Stronger than expected building approvals numbers and widespread JPY weakness has helped AUDJPY push back above its 200-SMA. Australian building approvals jumped an impressive 7.5% in November, following an even more impressive 11.5% m/m increase in the prior month. Seasonally adjusted dwelling approvals rose to 18,245 in November, which is the highest number since the ABS began compiling statistics in 1983.
The ensuing rally in the Australian dollar sent it through 0.8100 against the US dollar, albeit briefly. A pull-back in AUDUSD wasn’t matched in AUDJPY due to widespread yen weakness in the Asia session. While we are still waiting for a daily close above its 200-day SMA, this rally has breathed new life into the pair. The key test will be a resistance zone around 98.40, which is where the pair topped out in late December.
AUDJPY is ultimate proxy for risk, with AUD generally seen a risk currency and JPY as a safe haven trade. This means that the pair is a great indication for overall investor sentiment, thus its worth keeping an eye on volatility – which is also a measure of risk sentiment (increase vol. is generally good for AUDJPY, while lacklustre vol. can be bad for the pair).
It’s also worth keeping an eye on some key economic data out of China and Australia tomorrow. The ABS is due to release Australia’s retail sales figures at 1130AEST (expected 0.2% m/m) and we are expecting China’s inflation figures for December at 1230AEST (0130GMT). Consumer prices are expected to jump 1.5% y/y, slightly higher than the prior month’s 1.4% y/y increase but below the government’s official target. A lower than expected print tomorrow would provide even more incentive for the PBoC to cut interest rates, again, and/or the RRR.
Source: FOREX.com
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