The AUD/JPY has bounced a bit in the early part of the trading session on Tuesday, as it looks like the consolidation area remains.
AUD/JPY
The Australian dollar has fallen initially during the trading session on Tuesday to reach toward the crucial 200-day EMA, but has since bounced back pretty significantly.
The story is overwhelmingly Japanese yen strength rather than any weakness in the Australian dollar. The yen has surged as traders aggressively repriced the probability and pace of Bank of Japan tightening.
Top Regulated Brokers
Japanese GDP revision, stronger real wages, and increasingly hawkish BOJ rhetoric have strengthened the case for another rate hike.
At this point, the market is forcing a bit of an unwind in yen-funded carry trades, which is particularly important for this pair. This market is also seeing a little bit of a knock-on effect from the US dollar dropping so heavily against the Japanese yen.
That being said, the short-term rate differential dynamics have shifted slightly towards the Japanese, but the higher rates in Australia will eventually overwhelm that.
Right now, I see the 110 yen level as a major support level, especially now that we have the 200-day EMA there. The market has the 115 yen level above as the top of a range that we've been in for a while.
Short-term bias is slightly bearish, but overall, this is a market that will also be watching some of the announcements coming out of the United States, such as the CPI and PPI numbers, because they do have a little bit of an effect on global yields.
BOJ rhetoric ahead of the September 17th and September 18th dates will, of course, have influence as well. But really, consider how far this has fallen.
We have seen a significant bounce from the bottom of the range. So the question then becomes: are we still range-bound? It certainly looks like it at the moment.
Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.