The Australian dollar continues to rally against the Japanese yen, as we look at a difference between two central banks playing out.
AUD/JPY
The Australian dollar has rallied a little bit during the trading session to test the 50-day EMA on Monday and, perhaps more importantly, the middle of the overall range we have been in.
Keep in mind that the candlestick from the Friday session was extraordinarily bullish, but gave back about half of the gains. Now it looks like we are trying to get back to the top of that range, but we could not quite accomplish that early.
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The Australian dollar still has plenty of support as markets are increasingly pricing another RBA interest rate hike
The Australian dollar still has plenty of support as markets are increasingly pricing another RBA interest rate hike after Governor Bullock warned that upside inflation risks have materialized. The Japanese yen has a significant amount of weakness as the BOJ recently raised its policy rate to 1.25%, but two dissenting votes during that rate decision have limited hawkish guidance a little bit.
It has somewhat reduced the credibility of the tightening signal, which is something that you see a lot in the Japanese yen. Intervention risk has perhaps caused a little bit of intervention watch, so that might be part of why we are not just ripping to the upside.
Falling oil and stronger global equities are helping risk-sensitive currencies such as the Australian dollar. We are basically in a fair-value area from this year, or most of this year. So, it will be interesting to see if we can break above ¥113. If we do, that would be a very strong turn of events.
Pullbacks at this point in time, I suspect, still have plenty of support near ¥110, with the 200-day EMA adding more support there as well.
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