3 Sep 2013
AUD/JPY’s status as a risk proxy interrupted by AUD-bearish data flow
FXstreet.com (Barcelona) - Weak Chinese and Aussie data early Tuesday threw a wrench in the giddy global risk bulls’ engine - an engine that was using AUD/JPY as a key component.
Sometimes the best laid plans go to waste…
Global investors and traders were scrambling to add risk assets to their portfolios Sunday and early Monday so they loaded into the most liquid forms of this “risk-on” trade available – the AUD/JPY and EUR/JPY currency crosses. It’s a great idea – 24 hour liquidity and fewer “thin” markets than the equity index futures. The catch is that one must be fairly certain that there will be no surprises from any of the countries involved in the currency pairs being traded.
AUD/JPY was on a serious role until the early morning hours Tuesday when at 01:00 GMT Chinese Non-Manufacturing Data came in below estimates. That news might have been enough to halt the upside momentum, but the bulls received another kick in the teeth when Australian retail sales numbers came out below expectations as well. The cross, which had peaked at 89.93 just before the Chinese data, traded all the way down to 89.12 before rebounding a bit to 89.37 in the minutes prior to the Reserve Bank of Australia’s rate decision.
After the RBA’s decision to leave rates unchanged – with the flexibility to act later on if conditions called for it – the AUD/JPY jumped initially up to 89.66 - just below very short-term resistance earmarked by technicians (see below).
Technical outlook for AUD/JPY
Technicians have the AUD/JPY making it up to at least the 90.20 level even if this rally is just part of an overall “abc” corrective move higher. Shorter-term resistance comes in at 89.68, however. If it is something more than just an upside correction, they say the next two upside target levels are 91.63 and 92.50. Support for AUD/JPY comes in at 87.31 and 86.47.
Sometimes the best laid plans go to waste…
Global investors and traders were scrambling to add risk assets to their portfolios Sunday and early Monday so they loaded into the most liquid forms of this “risk-on” trade available – the AUD/JPY and EUR/JPY currency crosses. It’s a great idea – 24 hour liquidity and fewer “thin” markets than the equity index futures. The catch is that one must be fairly certain that there will be no surprises from any of the countries involved in the currency pairs being traded.
AUD/JPY was on a serious role until the early morning hours Tuesday when at 01:00 GMT Chinese Non-Manufacturing Data came in below estimates. That news might have been enough to halt the upside momentum, but the bulls received another kick in the teeth when Australian retail sales numbers came out below expectations as well. The cross, which had peaked at 89.93 just before the Chinese data, traded all the way down to 89.12 before rebounding a bit to 89.37 in the minutes prior to the Reserve Bank of Australia’s rate decision.
After the RBA’s decision to leave rates unchanged – with the flexibility to act later on if conditions called for it – the AUD/JPY jumped initially up to 89.66 - just below very short-term resistance earmarked by technicians (see below).
Technical outlook for AUD/JPY
Technicians have the AUD/JPY making it up to at least the 90.20 level even if this rally is just part of an overall “abc” corrective move higher. Shorter-term resistance comes in at 89.68, however. If it is something more than just an upside correction, they say the next two upside target levels are 91.63 and 92.50. Support for AUD/JPY comes in at 87.31 and 86.47.