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  • As a whole, financial markets have been somewhat calmer of late awaiting key central banks meetings.  
  • AUD/JPY testing bar’s commitments at trendline resistance.

AUD/JPY has been advancing on the leader board as risk appetite returns and the Aussie is making back some ground on the sentiment for trade talks gaining traction again. AUD/JPY is starting out in Asia on the 73 handle where it meets the downside resistance where a break of the level will put the 74 handle and then the 76 handle in focus.    

As a whole, financial markets have been somewhat calmer of late while we now move into central banks meeting this month. Following a volatile number of weeks with the comings and goings of geopolitical risks,    the market has been encouraged by the prospect of dialogue in October between the US and  China  over  trade  and White House economic advisor, Larry Kudlow, confirmed that there will be meetings commencing  later this month with a high-level meeting next month. Yields have been able to recover along with stocks, and in turn, the yen has dropped and AUD has turned higher.  

Encouragingly, the Aussie housing market has picked up steam in recent months following back to back rate cuts in June/July and relaxation in macro-prudential policy. The Reserve Bank of Australia will not be meeting until October 1st where the markets are pricing in11bp of easing  and a terminal rate of 0.50% – The RBA  cash rate is currently at 1.0%.

Dollar on the backfoot

The Dollar, currently on the backfoot, will be a keen focus for the week ahead as we await the Federal Reserve meeting and  following the US Nonfarm Payrolls that were weaker than expected for August, coming in at 130k against expectations of a 160k rise. “Manufacturing payrolls were at 3k (from 4k in July) whilst trade, transport and utilities were down 11k after rising modestly in July. The US retail sector continued to shed workers. Average hourly earnings beat expectations, rising 0.4% m/m (from 0.3% m/m in July). Year-on-year, average hourly earnings rose 3.2% y/y (from 3.3% y/y in July). The unemployment rate remained steady at 3.7%,” analysts at ANZ Bank explained.  

AUD/JPY levels

The cross is testing the bear’s commitments at the descending trendline resistance which guards spare to the 74 handle meeting the June lows. On the downside, the 70 handle was pierced to a low of 69.95 on the 26th August.