AUD/JPY: Another test of 90 multi-week? - Westpac

Sean Callow, Research Analyst at Westpac, noes ha AUD/JPY is little changed over the past month or so, though the intervening failed probe of 90 may be instructive.

Key Quotes

“While there should be caution ahead of the Japanese elections on Sunday, our underlying inclination is for another test of 90 multi-week, so long as global risk appetite remains positive.”

“Beyond 90 however, the pair could lack fresh fuel to overcome Japanese investor profit-taking.”

“AUD should find ongoing support from reasonable domestic growth momentum (especially job creation) and the RBA’s patience with sluggish inflation, which keeps markets debating the point in 2018 when interest rates will be raised.”

“JPY in contrast seems likely to retain an underlying depreciation bias, with the Bank of Japan committed to buying enough JGBs to keep the 10 year at 0%, in a world where many key central banks are moving towards tighter policy.”

“As usual, there are ongoing downside risks on AUD/JPY from any deterioration in risk sentiment, with major stock indexes near record highs and volatility low. Spec positioning (long AUD/USD, long USD/JPY) implies substantial fuel for AUD/JPY selling in the event of a “risk off” event.”