- The AUD/JPY initially tried to rally during early Thursday trading but has found quite a bit of noise and resistance at the ¥91 level.
- This is an area that’s been important more than once, it will almost certainly have a lot of market memory attached to it.
- It was previous support, so now it should be resisted and therefore I think a lot of people will be looking at this through the prism of whether or not the level will remain crucial.
It’s also worth noting that the 50-Day EMA is starting to break below the 200-Day EMA, forming the so-called death cross. The death cross of course is a very negative longer-term sign, so it’ll be interesting to see how this plays out. After all, the Japanese yen it is potentially one of the more interesting currencies to trade in 2023, as it was so feverishly sold off during most of the previous year. Remember, the Bank of Japan has stated that it is going to keep yield curve controls in place, with the 10-year note having a ceiling of 50 basis points.
Japanese Yen Likely to Continue to Get Hammered
It’s worth noting that the Japanese yen strengthening coincided quite a bit with the Bank of Japan hinting that it was going to do something. However, yields are only at 41 basis points overnight in the 10-year Japanese Government Bond, so there is still some room to wiggle. If we see the market threaten the 50 basis points level in the 10-year yield, it’s very likely that the Japanese yen will continue to get hammered as the central bank will be forced to print more courage for you to buy more debt.
It’s also worth noting that the Wednesday candlestick was rather brutal and showed massive buying against the Japanese yen, not only in the Australian dollar but most other currencies. In other words, we may have recently seen the “bottom” in the market, as we formed a double bottom at the ¥88 level. We are not quite out of the woods yet, but if we can significantly break above the ¥91 level, perhaps on a daily or even weekly close, then I believe this market will start to take off to the outside. Otherwise, we may find it bouncing around between ¥91 and ¥88.
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