- The AUD/JPY rallied a bit against the Japanese yen on Friday, slamming into the ¥91 level.
- It’s worth noting that we are getting rather close to significant resistance, especially as the 50-Day EMA has broken below the 200-Day EMA, kicking off the so-called “death cross.”
- This is a longer-term signal that sellers will jump on, so it’ll be interesting to see how this plays out.
Keep in mind that the Bank of Japan will have to worry about interest rates, as they have set a ceiling in the 10-year Japanese Government Bond yield at 50 basis points. We have seen the market go all the way back up to the 48-basis points level heading into the session, so if the Japanese are forced into printing yen to keep those interest rates down, it does make quite a bit of sense that we would see this market rally as a result. If we do break above the ¥91 level, then those moving averages will be your next hurdle. If we can break above those moving averages, then the market goes much higher, perhaps reaching the ¥95 level.
The Pair Could Drop
On the other hand, if we break down below the ¥90 level, then it’s likely that we could drop down to the ¥88 level. The ¥88 level is an area that has been supported a couple of times now, as we formed a micro “double bottom.” Breaking down below that could send this market much lower, but right now it looks like we are doing everything we can to fight the upside. The Australian dollar of course is highly correlated to risk appetite, so we need to see risk appetite returned. As things stand right now, I don’t know if we have that happen easily, but it is something that could be theoretically possible.
Keep an eye on the 10-year JGB chart, which you can find on www.tradingview.com, and keep an eye on that 50-basis point area. The closer we are to that level, the better that other currencies will do against the yen. Conversely, if yields start to fall in Japan, then that means there’s less pressure on the Bank of Japan to continue printing currency, therefore it’s likely that we would see this pair drop.
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