AUD JPY

As AUD/JPY is a classic barometer of risk, we should take note that all is not looking well around current levels. And if AUD/JPY tanks, it’s likely to be followed by risk in general.

If you haven’t heard already, Donald Trump has been elected as President of the United States. flipped the senate and on the cusp of taking the house. A risk-on session ensued, which played nicely for AUD/JPY bulls - who now have 103 in focus.

Stronger EU data and pushback on cuts from ECB sent EUR/USD up to its 200-day MA ahead of risk events. I also assess the trend structures of yen pairs to sort the good from the bad.

Underlying inflation remains uncomfortably high in Australia. With continued strength in hiring keeping labour market conditions tight, it means the prospect for RBA rate cuts in 2024 is now remote. For AUD/USD and AUD/JPY traders, external factors are likely to dictate direction from now until year-end, especially the Federal Reserve rates outlook and US election.

The USD and yields continued to surge following the release of the Fed's beige book. That, alongside a fast-approaching and tight US election race, is prompting Wall Street traders to reassess their exposure. Yet the fallout on ASX 200 futures was limited, and while AUD/JPY might retrace lower we still have an initial target around 102.

Momentum is finally turning higher for AUD/JPY, having found support at the 200-day EMA and 100 handle. We think a move to 102 could is not on the cards. Alongside another dip lower for Nikkei futures.

With Wall Street indices holding up and Australia's strong employment report holding up the Aussie in a weak-yen environment, AUD/JPY looks set for a breaking. Crude oil looks ready for a cheeky bounce too.

AUD/JPY looks to Wall Street for its next directional move while NZD/USD is down for a fifth day ahead of tomorrow's RBNZ meeting. But if they fail to deliver a dovish 50b cut, it could prompt profit taking from bears and weigh further on AUD/NZD.

A relatively hawkish meeting from the RBA has supported AUD over the past 24 hours, sent AUD/JPY to an 11-year high and made next week's inflation report the more important.

With unemployment spiking and broader measures of labour market slack increasing, the risk of strong wages growth sparking renewed inflationary pressures looks to have past.

AUD/JPY and EUR/JPY are sandwiched between range highs and uptrend support, meaning traders should be on alert for potential bearish and bullish breakout this week with big event risk in the United States and Europe approaching fast.

AUD/JPY and the ASX 200 look set to diverge with the former strongly hinting at a swing low and the latter failing to hold above 7900 on Tuesday.

Almost by stealth, the unloved and under pressure Aussie and Kiwi are not far off hitting decade highs against the yen. With the near-term price action in AUD/JPY and NZD/JPY pointing to upside, and with momentum indicators sending the same message, the risk of a topside break appears to be growing.

A broadly weaker US dollar helped AUD/USD rise at its fastest pace in twelve weeks, and given the record level of net-short exposure among asset managers, AUD/USD could have further upside potential.

Unless we see a big upside surprise in Thursday's PCE inflation report it may be difficult for US bond yields to continue pushing higher, limiting the fuel that helped propel the US dollar higher over the past two months.

It could be an interesting week for the Australian dollar if caught between the crossfire of the RBNZ meeting, Fed talk and US inflation data. We also have an Australian inflation report to throw into the mix for good measure.

AUD/JPY has fast approached a pivotal level to hint that an eventual breakout could be on the cards, even if not immediately. The ASX 200 looks sets to bounce after positive earning from Nvidia lifted Wall Street futures after market hours.