AUD/JPY drops and pops after RBA minutes

• AUD/JPY fell 10 pips after the RBA minutes showed the bank is ready to ease further if needed.  
• The decline was short-lived as policymakers debated the cost of easing.  

The AUD/JPY pair witnessed two-way business following the release of the Reserve Bank of Australia (RBA) October meeting minutes at 01:30 GMT.

The pair fell 10 pips 73.27 immediately after the minutes were released only to rise back to levels above 73.40. As of writing, the pair is trading around 73.41, representing marginal losses on the day.

Minutes of the meeting showed the RBA cut rates by 25 basis points at its October meeting due to weak global growth outlook, tepid domestic inflation, and considerable labor market spare capacity. The minutes also showed the was ready to consider further easing to support growth and achieve its 2% to 3% inflation target.

The dovish headline pushed the AUD lower. However, details revealed the policymakers discussed a range of arguments for not easing at the meeting, including a possible decline in the marginal efficiency of interest rate cuts, the need to reserve firepower for future negative shocks and the possibility of easy policy fueling asset bubbles.

Moreover, these factors may keep the RBA from cutting rates in the final two months of 2019. Hence, it’s not surprising that AUD/JPY quickly recovered the lost ground to trade above 73.40.

Looking forward, the pair may rise to 74.00 if China’s producer price inflation, due at 01:30 GMT, blows past expectations and the global equities pick up a strong bid, weakening demand for the anti-risk Yen (JPY).  As of now, the futures on the S&P 500 are reporting a 0.17% gain.

Technical levels