AUD/JPY down to test fresh lows as yen takes up the bid

  • AUD/JPY has dropped to test the North America session's lows following the RBA minutes.
  • AUD/JPY is currently trading at 80.91 with a low of 80.82 from a high of 81.12.

AUD/JPY has been on the back foot ever since the Aussie GDP came in at 0.3 % q/q ahead of the expected +0.6% q/q and prior +0.9% - 2.8 % y/y vs the expected +3.3% y/y and prior +3.4%. In risk soured markets, the cross, regarded as the FX space's risk barometer, has been extending the downside for the month as we head into the last full trading days of the year. 

Stocks on Wall Street were declining due to concerns over economic growth on a global scale. At the same time, there were newswires indicated that with funding for parts of the federal government set to expire midnight Friday, the White House and Democrats remain in a standoff over funding for a border wall. USD/JPY was the worst performer following the US 10yr treasury yield falling from 2.89% to 2.86%, while the 2yr yield fell from 2.74% to 2.70% as traders ran to quality sending bond prices higher and the yen stronger. 

RBA minutes note 'Sluggish household incomes, high debt, and falling home prices "posed downside risks"'

In Tokyo, the yen is extending the downside while AUD/USD remained pretty much unchanged following the RBA minutes:

Key points (Source: RBA)

  • Expected Q3 GDP growth to be above 3 pct for the year (vs actual 2.8 pct)
  • Expected GDP growth to run above potential this year and next
  • The Australian dollar remained within its range of recent years on a trade-weighted basis.
  • Australia's terms of trade had increased over recent years, which had helped to boost national income.
  • Members noted that the significant fall in oil prices was likely to reduce global headline inflation over the following year or so, should it be sustained.
  • The steady policy allowed RBA to be a source of stability and confidence
  • Sluggish household incomes, high debt, and falling home prices "posed downside risks"
  • Leading indicators pointed to above average jobs growth for the next couple of quarters
  • Further fall in the unemployment rate likely
  • Banks had slowed lending for housing investment and to small business
  • There had been a "generalized tightening of credit availability"
  • Noted a pick up in business lending by major banks to large businesses
  • Board noted difficult to gauge underlying growth in the Chinese economy
  • Growth had slowed in a number of economies globally, in part due to trade tensions

AUD/JPY levels

AUD/JPY is on the verge of a test the 61.8% fibo retracement of Nov's uptrend. However, RSI is neutral and ATR means it may take a number of sessions to make much progress below the level on a break thereof. S3 will be the main target at 80 ahead of 79 the figure. On the flip side, bulls need to get back above R2 located at 81.78 above the 50% retracement located at 81.31. 


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