- AUD / JPY bulls tire at the top and bears take over.
- The fundamentals are stacked against the bulls, for the time being at least.
The AUD / JPY is currently trading at 69.07 in a narrow range of 68.94 and 69.12 after a negative session mid-week which saw the cross lower the sleeve 70 and trade a cent of less. The risk tones reverberate on the foreign exchange market 24 hours a day, fueling a yen supply weighing on commodities and stocks while constantly putting pressure on the AUD.
All FOMC participants were against negative rates
There are a number of items stacked against the cross, with the American dollar resurfacing across the board and progress in the Aussie. The AUD / USD fell from 0.6470 to 0.6450 via an advance to 0.6523 before falling to 0.6438. Federal Reserve Chairman Jerome Powell reminded markets that negative rates were not an option, much to the chagrin of US President Donald Trump.
The Fed intends to continue using the tools he has already tried, “said Powell in response to questions at an event hosted by the Peterson Institute for International Economics.” The previous minutes on the negative rate debate indicate that all FOMC participants were against it, “said Powell. Despite this and a rally in the DXY, USD / JPY negotiated on the offer which in turn lowered the AUD / JPY, investors considering the trajectory of anticipated recovery.
Indeed, the economic reality of the coronavirus turns the screw and the raw materials sector suffers significant losses, with the exception of the precious metals sector. Trade wars are also starting to deepen following a mixed market downturn earlier this week. Australia’s call for an investigation into China’s role as the originator of the COVID-19 pandemic shocked the Chinese administration, which responded verbally and literally by imposing tariffs on Australian imports. More about it here.
Looking forward to
Meanwhile, today’s calendar presents the risks of the Labor Force Survey in April, as well as the New Zealand budget and unemployment claims in the United States – so there is plenty here for them. AUD / JPY traders to chew and potentially tip the scales.
Technically, the cross is headed towards a formation in mind, but it probably needs a fundamental confirmation to trigger the sale, while if not, those who bet on reflation in the medium term will probably consider the AUD as a justified cover. However, the basic probabilities are well highlighted against a smooth economic recovery, while uncertainty reigns over COVID-19 and the trade wars.