The AUD/JPY pair finds itself in the middle of the longer-term range, as traders take advantage of the swap.
AUD/JPY
The Australian dollar has been choppy against the Japanese yen during the early part of the session here on Tuesday as we challenge not only the ¥112 level, but also the 50-day EMA. We are sitting basically in the middle of the overall consolidation range that we had been in between ¥110 and ¥115. The 200-day EMA is currently sitting at the ¥110 level.
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Interest rates continue to matter
All things being equal, this is a market that enjoys a major interest rate differential. The Australian dollar could very well continue to go higher as the Reserve Bank of Australia will have to deal with energy inflation, and they have said that they are, in fact, worried about inflation in Australia.
At the same time, you have the Bank of Japan out there intervening occasionally, but you'll notice that even with those interventions, we haven't seen the Australian dollar break down against the yen. This tells me this is still a market that has plenty of buoyancy to it.
Short-term pullbacks, I think, offer buying opportunities, and as long as we can stay above the ¥110 level, I remain fairly bullish. I also recognize that this could be a choppy situation. You do get paid at the end of every day, so therefore it pays you to be a little bit patient here as well.
The Japanese yen has been a focus for forex traders in general, but quite frankly, I think the talk of intervention is probably starting to cool off. With this, the Japanese yen will more likely than not continue to struggle, as the recent vote to raise rates had two dissenters as well, meaning it isn’t a “confirmed hike” coming.
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