The Aussie continues to rally against the Yen on short-term drops in this well-defined range, as the interest rates play out in favor of Australia.
AUD/JPY
The Australian dollar initially pulled back against the Japanese yen during the trading session on Thursday but turned around to show signs of life. We are now starting to see rumors that the United States and the Iranians may be working on reopening the Strait of Hormuz, so it is possible that we are seeing a little more risk appetite coming back into the market. You are certainly seeing that in the stock markets suddenly, so we will have to wait and see.
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Keep in mind, we have heard stories like this in the past, and they generally end up disappointing, so that is something to be cognizant of. But when you look at this market, the interest rate differential stands out quite drastically anyway, so I do not necessarily think it is a bad idea to own the Australian dollar.
The market is in a 500-point range in general
The Japanese recently had an interest rate hike, but they also had two members dissent and not want to raise rates, so there are questions to be asked about how this plays out over the longer term.
I do believe, at this juncture, that we have to look at this through the prism of a market that is trying to do what it can to get back to essentially fair value. The market is in a 500-point range in general, and I do believe that is one of the defining traits of this market.
As this market continues to see a lot of noise attached to it via the carry trade, despite the fact that there have been multiple interventions, this is a market that still remains somewhat stable, and that is something worth paying attention to. Beyond that, the 200-day EMA sits just above the ¥110 level, and this is a market that so far looks like it does not want to break down below it.
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