- AUD/JPY has dipped back towards 82.50 as US equity market sentiment deteriorated, confirming failure to break out of recent ranges.
- The Aussie was underpinned on Thursday by strong jobs data and China monetary policy easing.
Though the currency has pulled back from its earlier session highs in tandem with a pullback from high in the US equity market, the Aussie remains on course to finish Thursday’s trading session as the best performer in the G10. But as sentiment on Wall Street has deteriorated, the safe-haven yen has been climbing the G10 rankings. The net result for AUD/JPY is that the pair has pulled back to trade just above 82.50, where it trades higher by about 0.2% on the day, having at one point earlier in the session challenged the 83.00 level, where it at the time was trading about 0.6% higher.
The Aussie’s outperformance on Thursday came following a stronger than forecast December jobs report, which showed the economy adding 64.8K jobs on the month, well above the 43.3K expected. The unemployment rate also dropped sharply to 4.2% from 4.6%, a much larger drop than the expected decline to 4.5%. The data will come as a surprise to the RBA, who forecast that Australia would end 2021 with an unemployment rate of about 4.75% and that this wouldn’t fall to 4.2% until the end of 2022. The jobs report thus endorsed very hawkish market expectations for RBA interest rate policy – despite the RBA insisting last year that the conditions for a rate hike would not be met until 2023 at the earliest, futures price a 70% probability of lift-off in May.
The data also underpinned expectations that the bank will axe its QE programme in its entirety at the upcoming February meeting. Separately, China’s PBoC eased monetary policy settings with cuts to its one and five-year loan prime rates on Thursday, boosting hopes that the recent slowdown in Chinese growth will abate later in the year, boosting the outlook for Aussie exports. Despite the positive developments that underpinned the Aussie on Thursday, the day’s price action suggests confirmed that AUD/JPY is not yet ready to break out of the recent 82.00-83.00 range that has persisted since last Friday. If risk-appetite stabilises and FX markets are free to trade more as a function of central bank divergence, then a bullish breakout above 83.00, which would open the door to a move towards 84.00, remains very much on the cards.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
AUD/USD failed just ahead of the 200-day SMA
Finally, AUD/USD managed to break above the 0.6500 barrier on Wednesday, extending the weekly recovery, although its advance faltered just ahead of the 0.6530 region, where the key 200-day SMA sits.
EUR/USD met some decent resistance above 1.0700
EUR/USD remained unable to gather extra upside traction and surpass the 1.0700 hurdle in a convincing fashion on Wednesday, instead giving away part of the weekly gains against the backdrop of a decent bounce in the Dollar.
Gold keeps consolidating ahead of US first-tier figures
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Bitcoin price could be primed for correction as bearish activity grows near $66K area
Bitcoin (BTC) price managed to maintain a northbound trajectory after the April 20 halving, despite bold assertions by analysts that the event would be a “sell the news” situation. However, after four days of strength, the tables could be turning as a dark cloud now hovers above BTC price.
Bank of Japan's predicament: The BOJ is trapped
In this special edition of TradeGATEHub Live Trading, we're joined by guest speaker Tavi @TaviCosta, who shares his insights on the Bank of Japan's current predicament, stating, 'The BOJ is Trapped.'