AUDJPY, H1 & Daily
AUDJPY is the biggest mover out of the main Dollar pairings and associated cross rates, presently off highs but still showing a 0.4% gain on the day. The cross posted a six-day peak at 74.78 earlier. The high was seen ahead of the open of European markets, amid a backdrop of buoyant stock markets in Asia, before a weak opening on European equity markets saw the cross, widely viewed a barometer of risk appetite in global markets, come off its highs.
Rising US-Iran tensions, and circumspection in market narrative about the chances of a significant improvement in US-China relations, appear to be curtailing optimism fuelled by the recent dovish policy pivots of major central banks.
Regarding the US and China situation, while the recent return to dialogue is to be welcomed, there remain concerns about the potential for a breakthrough after Beijing today indicated that FedEx Corp is likely to be added to Beijing’s “unreliable entities list,” and after the US Commerce Department said on Friday it was adding several Chinese companies to its national security “entity list.” Assuming that the US and China continue to struggle to find a resolution, and assuming US-Iran tensions continue to simmer, sentiment will remain fragile and event risk elevated.
Last week’s five-month low at 73.92 for AUDJPY provides a downside waypoint. Even with today’s rally the pair are on the 45th day below the key 20-day moving average following the failed breakout over 79.60 in the middle of April. The important 75.00 resistance area still holds, with support now at 74.00.
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Stuart Cowell
Head Market Analyst
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