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Today’s Trading Edge: AUD/JPY – Rate cut expectations to weigh heavily on Australian currency

Posted by Edward Moya on Feb 5, 2015 10:49:00 PM


AUD/JPY could be poised for further downside as expectations grow for the RBA to cut rates again.  According to a Bloomberg forecast, 11 of 24 economists are anticipating the Bank to cut rates again in March while 13 economists see a cut by April.  If they decide to cut at both meetings, we could see significant Australian dollar weakness across the board with all of its major trading partners. 

The AUD/JPY weekly chart shows the recent dive that occurred once price broke below the lower boundary of a parallel uptrend channel that extended back to the August 2013 low.  Price is now tentatively respecting both a key trendline that extends back to the 2009 low and the 200-week SMA. 

If tomorrow’s US Non-Farm Payroll provides a risk off event, we could see AUD/JPY make a drop back towards 89.24.  Eventually, the downward move should continue and ultimately slide towards the 2013 low, which is around the 86.40 region. 

In the event bullishness manages to gain momentum from these current levels and has a daily close above 93.75, upside may target the 200-day SMA which is currently trading at 96.25.  The catalyst for a bullish move could be a major rebound with commodity prices. 

The trade: Sell AUD/JPY at 92.00 with a stop loss at 94.00 and a take profit at 86.50.  The Risk/Reward Ratio is just under 1:3

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: AUDUSD, aussie, aud, Aussie Dollar, aussie trading


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