The Aussie dollar struggled initially on Tuesday against the yen but turned things around near the important 114 level.
AUD/JPY
The Aussie dollar did struggle a bit during the trading session on Tuesday to reach towards the 114 yen level but we have turned things around to show signs of life. At this point, the market is likely to continue to see the overall trend hold. This is a great interest rate differential play as the Bank of Japan is essentially stuck and where the Japanese simply cannot raise rates while the Australians have recently.
So with this, I think we continue to see a lot of upward pressure. Ultimately when you look at the recent consolidation that we broke out of, it's a 500-pip potential target. I like this for the idea of perhaps holding on, getting paid at the end of every day and then eventually perhaps closing out somewhere near 119 yen at least as a significant initial target.
Technical Support and the Japanese Yen Collapse
If we do break down below the 113 yen level, then the trade's dead and I think you're probably looking for support near the 50-day EMA. All things being equal, the one thing that you don't see me doing is shorting this pair or buying the Japanese yen.
It's worth noting that the Japanese yen is on the verge of some type of pretty significant collapse, especially against the US dollar as we are testing a swing high from 1990. That's not something you do every day and if that breaks, this will fall right along. So, this pair is Aussie strength, commodity strength as well with the Japanese yen weakness. This is one of my favorite pairs at the moment, although it's worth noting there are risk appetite problems so that's part of what's dragging the heels here.