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Sean Callow, analyst at Westpac, suggests that there was no real fundamental significance of 3 January “flash crash” for AUD/JPY as it has soon stabilized after that and is generally trading in modest ranges for most of this year, supported by the recovery in global equities.

Key Quotes

“Indeed AUD has held its ground quite well against JPY given the aggressive move in interest rate markets to price in substantial risk of RBA rate cuts since the early Feb change of RBA policy bias and clear signs of slower growth in the Australian economy.”

“RBA rate cut talk should remain the key topic for AUD in coming weeks, though the focus is very much on Jul-Aug as the likely window for the first move and a cut is already fully priced by Sep-Oct.”

“With AUD’s commodity price support also driving large trade surpluses, JPY weakness may be the driver of the next sustained move on AUD/JPY. Spec positioning on USD/JPY is helpfully balanced and market talk about looser monetary policy could pick up ahead of the BoJ’s quarterly forecast release at the 24-25 Apr meeting.”

“AUD/JPY 80 looks like strong resistance short term but it should be broken, with scope for 81+ in April.”