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  • AUD/JPY swallowed up below  the 200 4-hour moving average and 21-day moving average.
  • Yen is going to be supported against a backdrop of deteriorating economies.

AUD/JPY has fallen away and into a bearish territory below the 200 4-hour moving average and 21-day moving average as global economic risks continue to weigh on the risk sentiment in the markets, supporting the Yen.

At the time of writing, AUD/JPY is flat in Asia but had fallen from the 74 handle mid-Sep and continues to bleed out at the start of a new month and quarter as markets anticipate a troubling time into year-end, forcing the hands of central banks which could be on the verge of taking unconventional measures to support their domicile economies.  

Reserve Bank of Australia (RBA) delivered the expected 25bp cut

Yesterday afternoon the Reserve Bank of Australia (RBA) delivered the expected 25bp cut to bring its cash rate down to 0.75%. But it was the tone of the commentary that paves the way for future cuts, as analysts at ANZ bank pointed out, presenting an extract from the RBA as follows:

“It is reasonable to expect that an extended period of low-interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments, including the labour market, and is prepared to ease monetary policy further if needed”.  

The analysts at ANZ explained that they expect further RBA cuts over coming months, “with the possibility of another move before Christmas dependent on the evolution of the data and overseas developments”.  

In the same vein, the Yen is going to be supported against a backdrop of deteriorating economies. In today’s markets, the US economy presented a dismal picture in the manufacturing sector which caused a run to the Yen – However, the initial knee-jerk reaction might dissolve when the data is properly digested seeings as the Markit’s purchasing managers index, suggested that U.S. manufacturing was not only in expansion in September but also growing at the fastest pace in five months. Indeed, “we’re still well above the 42.9 mark which even the ISM says “generally indicates an expansion of the overall economy”. So, while manufacturing woes are not good news, they do not preclude continued expansion of the U.S. economy,” as analysts at  
NBF Economics and Strategy noted.

AUD/JPY levels