The Australian dollar has been fairly stable recently, and it has actually risen against weaker rivals such as the New Zealand dollar and Japanese yen. However, that could all change if investors start to dislike risk, if, for example, U.S. elections or disappointing corporate earnings cause global equities to retreat. There is also a risk that tonight’s CPI inflation figures from Australia will disappoint expectations, while the Reserve Bank of Australia may surprise the market with a dovish policy statement next week. Among the most interesting Aussie pairs to watch is the AUD/JPY, for there is also some key Japanese data to consider at the end of this week, ahead of the Bank of Japan’s policy meeting next week.
But the immediate focus will be on Aussie CPI, which will be released in the early hours of Wednesday. Headline Aussie CPI is expected to have risen by 0.5% quarter-over-quarter in Q3, with the so-called “trimmed mean” version – which excludes the price changes of the volatile 30% of goods and services purchased by consumers – likely to have increased by 0.5%. Any noticeable deviation from these figures may cause a sharp move in the Aussie overnight.
Ahead of all the above-mentioned fundamental events, the AUD/JPY has reached a key juncture today: 0.80. Around this psychologically-important level, we have several other technical factors also converging, above all the 200-day moving average. This particular moving average has offered strong resistance in the past and is still pointing lower. There is also a bearish trend line to consider which has been in place for almost a year now. What’s more, this 0.80 area had been previously resistance, too. So, there are lots of reasons why the AUD/JPY could retreat from this level. If so, the bears would then like to see the breakdown of some key supports, starting with 78.85.
But the bulls would argue that the recent trend has been bullish, as highlighted for example by AUD/JPY making higher highs and higher lows on smaller time frames. In addition, the 50-day moving average has started to point higher and price is holding above it currently. A convincing break above the 0.8000-35 resistance area is what is required for this group of market participants to become more vocal. If seen, we could then see the start of a more significant rally towards the Fibonacci levels shown on the chart.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. GAIN Capital Group, LLC is a registered Futures Commission Merchant and Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission (CFTC)and is a member of the National Futures Association (NFA # 0339826) in the US, GAIN Capital UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, GAIN Capital Australia Pty. Ltd is regulated by the Australian Securities and Investment Commission (ASIC) in Australia, and GAIN Capital Japan Co. Ltd is authorised and regulated by the Financial Services Agency (FSA) in Japan.