USDJPY lifted to a two-day high at 111.69 while EURJPY ascended to a 2-week peak, at 126.74. Other Yen crosses have also been buoyant, with the Japanese currency having been underperformed.
One notable exception has been AUDJPY, which dipped amid underperformance in the Australian Dollar, which was seen concurrently with a 4%-plus tumble in iron ore prices (sparked by news of the reopening of a major mining operation in Brazil). Stock markets have mostly traded softer in Asia, which has seen the MSCI Asia-Pacific (ex-Japan) index pull back from 6-month highs, although the softer Yen has given Japanese exporter stocks a boost, which has seen the Nikkei 225 index post modest gains.
Markets have gone into pre-event risk mode ahead of the Fed’s policy announcement today, having priced in a reaffirmation of the central bank’s January dovish turn. There has been reports that China is pushing back against some US demands in trade negotiations. US Trade Representative Lighthizer and Treasury Secretary Mnuchin are due to travel to Beijing next week for the next round of high level talks, and most pundits are seeing scope for compromise with both sides eager to avoid prolonged economic damage that the dispute has evidently being causing.
But lets move back to AUDJPY, which seems to be ready for another rounding top formation as given in the daily figure below. Even though a ranging market has been identify since the beginning of the year, with the pair bouncing between 77.00-79.90 barriers, a closer look shows that following the peak on Monday at 79.40, the asset turned lower yesterday, raising expectations for a possible retest of range’s lower edge.
However as the asset is trading above 20- and 50-day SMA, the daily picture remains neutral, with momentum indicators preserving the consolidation mode, as RSI and MACD have been flattened around neutral zone. Only a confirm close today below the 78.80 daily Support area could turn the attention toward 3-months low territory between 77.20-77.70 area.
In the short term however, Aussie took a spill earlier, concurrently with a 4%-plus tumble in iron ore prices (sparked by news of the reopening of a major mining operation in Brazil); iron ore being the biggest Australian export. AUDJPY rebounded from 3-day bottom which coincides with 20-day MA and lifted above PP level at 79.00 area, having also been buoyant amid Japanese currency underperformance. As the downwards move occurred yesterday seems overstretched (oversold technical indicators, price outside Bollinger bands), a small U-turn has been formed in the hourly chart suggesting some positive bias in the short term. Next Resistance is set at 79.15-79.20 (R1 and Yestrday’s peak). Further gains within the day could found Resistance at 79.35-79.40.
On the rejection of initial Resistance, the pair could fall back to 3-day’s low which is also the 200-hour SMA, at 78.75 and just a breath below the confluence of S1 and lower BB level.
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Andria Pichidi
Market Analyst
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