AUDJPY is the go to risk on currency.
As China has not been able to stage a comeback, AUD has been selling off.
RBA hiked last week but the market sold off after.
RBA basically stated further rate hikes will be based on data. This has been seen as a dovish hike and Aussie data becomes more important than ever.
With inflation holding levels or starting to slightly increase in most countries, I do not think Central Banks will hike unless they see no other option.
For Australia, CPI is still very high but markets do not believe they have more hikes going forward. Personally, the hiking cycle has ended for Aussie. Risk to this trade then is higher employment and CPI numbers.
Japan, on the other hand, has been keeping policy ultra low for decades now. BOJ has been keeping market on their toes with verbal intervention.
I believe even if there is no intervention, this pair is looking lower.
Inflation in Japan will be flowing through unions where there is a possibility of another 6% increase in wages. Another year of higher wages than CPI and with lower interest rates, animal spirits are high. Look at Nikkei 225 this year.
If we enter recession, I still think Yen acts as the safe haven play one last time (supported by lower yields). In the recent Gaza conflict, we saw Gold and CHF react but not Yen, so that allure is slowing declining.
Technically, it looks like a double top/triple top (12% decline) and then 1st attempt and 2nd attempt (following 6% decline). Stops at 97.80 (100 pips stop from current prices) with initial target at 93 - 92.80. Close to 4:1 risk/reward (if you like trades based on the metric).
Carry is high with most Yen pairs so beware of that.
As China has not been able to stage a comeback, AUD has been selling off.
RBA hiked last week but the market sold off after.
RBA basically stated further rate hikes will be based on data. This has been seen as a dovish hike and Aussie data becomes more important than ever.
With inflation holding levels or starting to slightly increase in most countries, I do not think Central Banks will hike unless they see no other option.
For Australia, CPI is still very high but markets do not believe they have more hikes going forward. Personally, the hiking cycle has ended for Aussie. Risk to this trade then is higher employment and CPI numbers.
Japan, on the other hand, has been keeping policy ultra low for decades now. BOJ has been keeping market on their toes with verbal intervention.
I believe even if there is no intervention, this pair is looking lower.
Inflation in Japan will be flowing through unions where there is a possibility of another 6% increase in wages. Another year of higher wages than CPI and with lower interest rates, animal spirits are high. Look at Nikkei 225 this year.
If we enter recession, I still think Yen acts as the safe haven play one last time (supported by lower yields). In the recent Gaza conflict, we saw Gold and CHF react but not Yen, so that allure is slowing declining.
Technically, it looks like a double top/triple top (12% decline) and then 1st attempt and 2nd attempt (following 6% decline). Stops at 97.80 (100 pips stop from current prices) with initial target at 93 - 92.80. Close to 4:1 risk/reward (if you like trades based on the metric).
Carry is high with most Yen pairs so beware of that.
Comment:
Re-entering with stops at 98