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  • AUD/JPY is struggling to bounce from key ascending trendline support.  
  • RBA’s Debelle said on Tuesday that low wage growth is a new norm in Australia.  
  • Fed’s Powell said the central bank will respond if economic conditions deteriorate.  

AUD/JPY is struggling to pick up a strong bid after Reserve Bank of Australia’s (RBA) Deputy Governor Guy Debelle’s familiar rhetoric on wage growth.

Debelle, while speaking at the Australian Council of Social Service national conference, said that wage rises of 2-3% are a new norm in Australia, rather than 3-4% and further tightening of the labor market is needed to push up wage-price inflation.

Deputy Governor’s comments offered little hawkish or dovish surprise. So far, the AUD/JPY pair has added just 10 pips – the pair is currently trading near 73.90, having hit a low of 73.80 a few minutes before press time.

Looking forward, big gains may remain elusive as the futures on the S&P 500 are showing little signs of life despite the comments by Federal Reserve’s President Powell that the central bank would respond if developments cause a material reassessment of the economic outlook.

Note that the US yield curve, as represented by the spread between the 10 and the two-year yield, has flattened for nine straight days, the longest stretch since Nov. 25, 2015. The flattening of the yield curve is considered a negative sign for the economy and could weigh over the US equity index futures, pushing the anti-risk Japanese Yen higher.

Technically speaking, the pair has been struggling to gather upside traction since Nov. 16 despite the bullish crossover of the 50 and 100-day moving averages. At the same time, the downside has been restricted by the support of the trendline rising from the Aug. 26 and Oct. 10 lows. At press time, the support is located at 73.77. A violation there will likely yield q quick drop to the psychological support of 73.00.

Technical levels