AUD/JPY: Bears see the greenlight for deeper positioning

AUD/JPY has been whipsawed, printing lows down to below the 70 handle and then snapping back to a trend-line resistance and back through the 72 handle. There have been a number of inputs including sentiment around trade wars, trade negotiations between the US and Japan and monetary policy.  

The Aussie was under pressure a little overnight as traders awaited Debelle anxiously. However, RBA Deputy Governor appeared to rule out negative cash when speaking on the topic of the balance of payments.

“Dr Debelle was asked about how low-interest rates could go. His answer to us suggested the RBA will prefer to take cash to around 0.25% or even zero before explicitly looking at quantitative easing,” analysts at ANZ Bank explained.  

When asked about how low-interest rates could go he said the following, according to a story from Bloomberg:

“If you look at what happened in the US, Canada and the UK, when they got down to their lows it was somewhere around zero, quarter, half a percent. And so I think that probably gives us some sort of guide as to what the equivalent might be here.”

Trade wars whipsawing the Yen

On the trade war front, there is no end to the risk-on and off changes that we are experiencing on every word or tweet and headlines that seems to contract the prior. This is a new paradigm  shift that markets will have to suffer, as the previous trade was to  ‘buy  yen at all costs’, but the markets have proven that such a strategy may not play out as well as it should and the yen can too be sold off in a heartbeat – The yen has been tracking stocks and it seems that while the machines are at play, the flip of sentiment from one day to the next will continue to take the yen for a rollercoaster ride.  

AUD/JPY levels

The cross is stabilising but the flood gates have been opened with the recent downside spike, clearing out stops and the less committed bulls. However, the upside targets come in on the 72 handle on a break of trendline resistance opening prospects for the 73 handle.