- Trade ceasefire may not be all that of a game changer for FX markets.
- AUD/JPY to trade as a proxy to volatility in equities between 200-D MA and 2019 lows.
AUD/JPY and Risk-on currencies higher at the open on Monday in early Asia following a widely expected ceasefire in the trade war between Trump-Xi whereby the export ban on Huawei was lifted, at least partially, to enable negotiations to move forward. AUD/JPY gapped onto the 76 handle from a close of 75.77 last week.
While the ceasefire is good news for markets at the start of this week, it seems all a little bit Deja Vue and all a little too convenient for Trump timing wise considering his forthcoming re-election campaign. There are also going to be large obstacles in the way before Washington and Beijing can find a deal that satisfies both ends.
Eyes on the Federal Reserve
The ceasefire may not be all that of a game changer for FX markets in the immediate future and eyes will quickly move to the Nonfarm Payrolls risk at the end of this week, considering the new easing cycle that the Federal Reserve and other central banks from around the world have embarked upon. The Federal Reserve is widely expected to cut interest rates this month which is priced in, although their take on pending risks from a prolonged trade standoff will be a key focus with regards to future cuts later this year. The Aussie and the yen will continue to trade as a proxy to volatility in the equity space subsequent to sentiment going forward.
AUD/JPY levels
The cross is finding a bid on the relief of the ceasefire but needs to get above the 77.50 to mark any material influence on the downside ahead of the 200 moving average close to the 79 handle and above the Oct and Sep 2018 lows around 78.60. On the downside, 75 the figure guards 73.90.
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