Australian Dollar Continues to Outperform, Japanese Yen Extends Losses

The Australian dollar edged lower against its U.S. counterpart following the rise in risk aversion, but remains the best performing currency amongst the majors as investors anticipate the Reserve Bank of Australia to normalize monetary policy over the coming months. The AUD/USD slipped to a low of 0.9160 and remains slightly lower from the open after moving approximately 109% of its average true range, and the pair may continue to hold the upward trending channel carried over from the end of December as growth prospects for the $1T economy improves. Nevertheless, the aussie-dollar looks to be finding intraday support around the 120-SMA at 0.9162, and the pair may continue to hold steady going into the Asian trade as investors wait for the U.S. non-farm payrolls report due out tomorrow at 13:30 GMT. As risk trends continue to dictate price action in the currency market, the drop in risk appetite may continue to dragon the exchange range as the reserve-currency continues to benefit from safe-haven flows, but an improved U.S. employment report could spark a rise in risk appetite as investors weigh the outlook for future growth.

The Japanese Yen extend its decline and remains the worst performing currency against the greenback on Thursday, and the low-yielding currency may continue to lose ground going forward as Japan’s new Finance Minister Naoto Kan aims to temper the appreciation in the exchange rate. The USD/JPY rose to a high of 93.40 following the comments from Mr. Kan, and remains nearly 90pips higher on the day after moving 142% of its daily ATR. However, as the short-term rally stalls ahead of the 200-Day SMA at 93.53, we may see the dollar-yen pull back and fill-in the gap from the 240-SMA at 92.45 as the 30-minute RSI falls back from overbought territory. Nevertheless, as the rally remains well-supported by the 20-Day SMA at 91.10, we may see the USD/JPY continue to retrace the decline from August as policy makers in Japan support a weaker yen.

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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com