- AUD/JPY has backed off from six-month highs hit in the overnight trade.
- The correction could be transient, as equity markets are likely to remain bid.
AUD/JPY has pulled back from six-month highs reached in the overnight trade and could drop below 76.00. The correction could be short-lived if the equity market buoyancy continues.
The pair is currently trading at 76.03, having hit a high of 76.18 five hours ago. That was the highest level since July 1.
Markets offered anti-risk yen (JPY) on Thursday, as equities cheered the surface level US-China trade truce. Notably, the tech-heavy Nasdaq rose above 9,000 for the first time.
With the e-commerce giant Amazon.com Inc. reporting a “record-breaking” holiday season, the risk-on rally in equities looks set to continue. As a result, the path of least resistance for the AUD/JPY appears to be on the higher side.
The bullish case looks stronger if we take into account the Japanese data released earlier today, which showed the industrial production fell 8.1% year-on-year in November, missing the estimate of a 0.9% rise by a big margin.
The monthly figure came in at -0.9%, bettering expectations for a 1.4% drop. Also, the seasonally adjusted jobless rate fell to 2.2% in November from 2.4% in the previous month and the jobs-to-applicants ratio stood at 1.57 in November.
While the drop in the unemployment rate is positive, the Bank of Japan is unlikely to change its ultra-dovish policy stance anytime soon.
Technical levels