General analysis AUDJPY for 07.06.2022
Current dynamics
The AUD/JPY breached the 96.00 level and fluctuates around the 94.35 level amid decisive hawkish measures taken by the Reserve Bank of Australia (RBA).
The rate hike was clearly expected by all market participants, as rising inflation in the Australian economy can only be stopped by tighter monetary policy. The Reserve Bank of Australia (RBA) raised its key rate by 50 basis points, from 0.35 percent to 0.85 percent, exceeding analysts expectations, who were divided in their forecasts between a final rate of 0.6 percent or 0.75 percent. This is the second consecutive monthly increase in an effort to control growing inflation. Such a big interest rate hike was the biggest increase since 2000 and has naturally woken up the bulls enormous appetite for the "ozzie".
This shock, caused by the Reserve Bank's decision not meeting traders expectations, is caused by the fact that in addition to problems with rapidly rising inflation, the Australian economy is experiencing significant complications in the labor market. Making such a decision, so sharp and consistent increase in the key rate, is quite risky for the national Australian economy, increases the likelihood of recession, puts the labor market at risk.
News from the Land of the Rising Sun also contributed to the pairs rapid rally. Head of Bank of Japan (BOJ) Haruhiko Kuroda said that right now a weak yen is good for the national economy. He defends soft monetary policy saying that a tightening of monetary policy would be inappropriate and have a negative impact on both domestic consumption and capital investment. Recent macroeconomic indicators showed a divergence in average wage and overtime pay growth and a drop in the household spending index.
Upcoming AUD/JPY news that could have an impact on the future course of events include the release of Adjusted Current Account and quarterly and annual GDP data for Japan and the Australian Business Confidence Index, which will be released on Wednesday.
Support and resistance levels
Alligator is hungry: its mouth is wide open, its jaw (blue line) is low under the lips and teeth (green and red lines), the instrument is in an uptrend. The nearest fractal above the alligator’s teeth (red line) is at 94.430. Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the gray area, showing a divergence, which is not a reliable signal to open a position.
- Support levels: 94.800, 94.430, 93.810.
- Resistance levels: 97.190, 96.570, 95.960.
Trading scenarios
- Long positions can be opened at the level of 95.960, with a target of 96.570 and stop loss 95.350: Implementation period: 1-2 days.
- Short positions can be opened at the level of 94.800 with a target of 94.430 and stop loss 95.350: Implementation period: 1-2 days.