- AUD/JPY extends pull back from session highs after RBA minutes.
- The central bank thinks the economic downturn could be shallow.
- The bank, however, is unlikely to reverse the easy monetary policy any time soon.
- The Fed-led risk reset in the equity markets favors upside in AUD/JPY.
The minutes of the Reserve Bank of Australia’s meeting held in May released soon before press time failed to put a bid under the Aussie dollar, leaving the AUD/JPY pair largely unaffected near 74.47. The pair has pulled back by 40 pips from session highs over the last hour.
The minutes said that the target for three-year yields would be maintained until progress is made towards the bank’s goals of full employment and the inflation target. The members agreed that the central bank’s stimulus package was working as expected and that the downturn could be shallower than earlier expected.
Even so, the AUD is struggling to reverse the pullback from session highs, possibly because the bak’s optimism about a potential shallow recovery would fade if the coronavirus numbers begin to rise across the globe. Beijing and some of the states in the US are already witnessing a second wave of the virus. Also, the central bank is unlikely to abandon yield curve controls and low rates any time soon.
looking ahead, the AUD/JPY pair is likely to take cues from the action in the S&P 500 futures. At press time, the stock index futures are reporting a 0.8% gain.
The US stocks rallied on Monday, pushing the greenback and the Japanese yen lower against majors after the Federal Reserve said that it would start purchasing corporate bonds. While the risk sentiment remains strong during Tuesday’s Asian trading hours, as suggested by the uptick in the S&P 500 futures, the AUD/JPY is struggling to print notable gains.
Technical levels
Share
