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AUD/JPY: bulls seeking a break of the 100 dma

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 1, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - AUD/JPY has been challenging the 100 dma at 86.16, but has only managed a high of 86.00 so far today.

    The price is being dictated by the recent actions at the BoJ which leaves the downside in the Yen, for the near term at least, exposed and the cross has rallied initially fueled by Australia's surprise Q4 CPI result.

    The BoJ added "another dimension" when they announced it would adopt a negative discount rate. The BoJ called the move “adding another dimension” to its policy toolbox, while the Central Bank now has three dimensions: quantity (money base increase at JPY 80trn per annum); quality (asset purchases – principally JPY 80trn/per annum JGBs, also JREIT and ETFs); and now, negative rates.

    "The two main reasons why the BoJ has done this are: first to force financial institutions to either lend out or invest in risky assets any money that they receive from selling JGBs to the BoJ under the QQE, and second, to extend the life of its current easing policy given its inflation goal is proving elusive," as explained by analysts at ANZ.

    We have the RBA coming up as well, and while it is unexpected that the RBA is about to act, markets will be tuned in to the rhetoric of Stevens, looking out for comments over the value of the Aussie and its recent rally in respect to the value of commodity prices and his outlook on inflation.

    AUD/JPY levels

    Technically, the upside is precarious below the 200 dma at 89.22 within the broader range when casting the charts right back to November 2014, while the near-term downtrend developed in December 2015 at the 200 dma at the time of 90.58. RSI(14) is neutral at 58.60 on the daily recently, with spot trading above the pivot at 85.42 and a break of the 100 dma at 86.16 bring sin a full recovery of the 2016 downtrend at 87.82.
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