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FOREX: AUDJPY Slumps 1.8% as Risk Sentiment Sours

FOREX
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  • Curves bull flattening in core fixed income markets and aggressive weakening for global equity benchmarks have contributed to significant risk off trade in currency markets Tuesday, with AUD the notable laggard in the space and the Japanese Yen top of the G10 pile.
  • As such AUDJPY is 1.8% lower on the day and has notably erased an entire week’s worth of gains in one swoop. The 50-day exponential moving average, and the 100.00 mark proved a very strong resistance area for the cross and today’s weakness sees the pair trade back below the 20-day average.
  • Further weakness may be dependent on whether AUDUSD can extend its current corrective pullback and make a meaningful break below its firm support between 0.6714-0.6670, 20- and 50-day EMA values.
  • Yen strength on Tuesday was underpinned by comments overnight from BoJ Governor Ueda reiterated Tuesday that the central bank will continue to raise interest rates if the economy and prices perform as expected.
  • USDJPY’s trend structure is bearish, and risk sentiment has underpinned this theme, with the pair trading as low was 145.16, an impressive 200 pips off session highs. Below here, support does not come in until 143.45, the Aug 26 low.
  • Looking ahead, the Bank of Canada is more than fully priced to opt for a third consecutive 25bp cut on Wednesday to 4.25%. USDCAD is 0.4% higher on the session and our analyst notes that the most recent shallow retracement appears to be a flag formation - a bearish continuation pattern. Sights are on 1.3358, a Fibonacci retracement. On the upside, initial firm resistance to watch is at 1.3594.
  • Elsewhere on Wednesday, Australian GDP and US JOLTS data will be in focus.
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  • Curves bull flattening in core fixed income markets and aggressive weakening for global equity benchmarks have contributed to significant risk off trade in currency markets Tuesday, with AUD the notable laggard in the space and the Japanese Yen top of the G10 pile.
  • As such AUDJPY is 1.8% lower on the day and has notably erased an entire week’s worth of gains in one swoop. The 50-day exponential moving average, and the 100.00 mark proved a very strong resistance area for the cross and today’s weakness sees the pair trade back below the 20-day average.
  • Further weakness may be dependent on whether AUDUSD can extend its current corrective pullback and make a meaningful break below its firm support between 0.6714-0.6670, 20- and 50-day EMA values.
  • Yen strength on Tuesday was underpinned by comments overnight from BoJ Governor Ueda reiterated Tuesday that the central bank will continue to raise interest rates if the economy and prices perform as expected.
  • USDJPY’s trend structure is bearish, and risk sentiment has underpinned this theme, with the pair trading as low was 145.16, an impressive 200 pips off session highs. Below here, support does not come in until 143.45, the Aug 26 low.
  • Looking ahead, the Bank of Canada is more than fully priced to opt for a third consecutive 25bp cut on Wednesday to 4.25%. USDCAD is 0.4% higher on the session and our analyst notes that the most recent shallow retracement appears to be a flag formation - a bearish continuation pattern. Sights are on 1.3358, a Fibonacci retracement. On the upside, initial firm resistance to watch is at 1.3594.
  • Elsewhere on Wednesday, Australian GDP and US JOLTS data will be in focus.