Chart of the day: A market ready to move higher?
A risk-on mood and strengthening Australian dollar pushed the AUDJPY forex pair up 1.5% in yesterday’s trading, and it looks like a market that’s ready to move higher.
Markets expected a dovish stance from the RBA yesterday to counter the triple threat of drought, bushfires, and the coronavirus - but that wasn’t to be. After its meeting, the RBA displayed patience to ride out any fallout, which it emphasised would be ‘temporary’. AUD strengthened back to what was a multi-month support level, and market probabilities of rate cuts halved, with just one 25bp cut now priced in over the next 12 months.
RBA Governor Phillip Lowe spoke midday and reinforced the case against further rate cuts. He’s cautious that ‘too much of a good thing’ could encourage ‘too much borrowing and driving excessive asset valuations.’ AUDJPY strengthened from 73.562 before the speech, to as high as 73.843 afterwards, and has settled since at 73.740 as I write.
As the virus panic subsides and the RBA reinforces an upbeat sentiment, it seems there is room for AUDJPY to push higher.
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