Chart of the Day AUDJPY

Chart of the Day AUDJPY

Another leg lower AUDJPY

President Xi has set the tone for striking the balance between fighting the virus and ensuring stable economic growth. On one hand, China will further step up its efforts to contain the spread of disease in the epicentre of Hubei province via further restricting people movement. On the other hand, China will try to encourage companies outside Hubei province to restart operations as soon as possible. The data outside Hubei has been supportive given the newly confirmed cases outside Hubei have fallen for thirteen consecutive days. On virus outbreak, the Dean of Lei Shen Shan hospital, a special hospital designed to take care of severely ill coronavirus infected patients, said he believed the real turning point has come.

The People’s Bank of China is expected to cut its one and five year Loan Prime Rates again on Wednesday evening. The fiver is expected to be cut by 5–10bps and the one year rate by 10 in a mild steepening of policy rates. Market rates have already been pushed lower including a ½% decline in the five and ten year bond yield since late October. Such a reduction in the administered rates would partly reinforce market movements. In fact, in a certain sense, the way China does this is somewhat backward to elsewhere. Large open market liquidity injections have been occurring in order to drive market rates lower and then the administered policy rates are subsequently cut. It’s the central banker’s version of starting with dessert. Most central banks will cut the policy reference rate or range and instruct their market desks to engineer market rates toward the policy levels.

Australia’s latest jobs reading for January (markets look for the unemployment rate to nudge up to 5.2%, and for wages to increase at a subdued 0.5% pace in Q4). and minutes to the RBA’s February third meeting are the key focus for the week ahead. Hiring has remained resilient, but the first print of the new year may be more influenced by economic uncertainty stemming in part from factors like the coronavirus and fires. The meeting minutes are unlikely to shed new information after Governor Lowe has stated that the balance of risks to further easing is more tilted to the downside than the upside at this point. There is only second-tier economic data in the US but there are 12 speeches from Fed officials and the minutes to the last FOMC meeting are released. 

Chart of the Day AUDJPY

From a technical and trading perspective, the AUDJPY is currently correcting its sharp january decline as 74.40 continues to cap the upside it seems likely that a failure through 73.50 will open a quick move to test bids and stops below 73.00. Through 73.00 will set bearish sights on a test of an equality objective sited at 71.55. A move through 74.50 would likely delay downside objectives and open a move to test an upside equality objective towards 75.00 as highlighted in the chart.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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