AUD/JPY is a pair that a lot of traders shy away from. This is because of the fact that it can move in massive swings, and being on the wrong side of the market can be very difficult for the newer trader to stomach. As time goes on, the new traders becomes a more experienced one, but the initial bias against the pair will be somewhat engrained.
However, by skipping out on this pair, the trader misses a very “clean” risk on or risk off trade. In fact, there are few pairs that are so clearly in tune with the risk appetite of traders as this one. The Aussie is tied to the global commodity trade, and the Yen of course is a “safe haven” in the currency markets. When things are scary to the traders out there, this pair just plummets. It is because of this that traders can really clean up in times of fear in this pair, or conversely by buying this pair when things are going well.
The recent news from around the globe continues to be negative and this pair has been showing it. The news from the major economies shows no hints of reversing, so this pair should continue to be bearish overall.
However, this isn’t to say that the pair can’t bounce. The pair did form a hammer for the session on Friday, and this is probably predicated on the idea that the Federal Reserve could ease after the poor jobs number on Friday. If easing does happen, the commodity markets should get a boost, and this is why this pair would bounce as the markets are anticipating a bounce in the gold, copper, oil, and many other futures.
However, this isn’t a sealed deal as of yet, and until that happens it is unlikely that bounces look likely to last for long. In fact, I am looking to sell this pair after we get this much needed bounce. If the easing happens, there is also a threat of the action only lasting for a short burst in the markets as it would be a sign that things are indeed getting worse.