AUD/JPY Continues to Track Risk Sentiments; Bullish RSI Trigger in Play
Despite the bearish seasonal bias surrounding the Australian dollar, AUD/JPY pares the weakness from earlier this month, with aussie-yen at risk for a larger recovery as market participants boost their appetite for risk. The near-term outlook for AUD/JPY remains tilted to the topside especially as the Nikkei225 pushes to fresh 2017-highs, and the pair may continue to recoup the losses from earlier this year as market participants utilize the Japanese Yen as a funding-currency.
At the same time, Prime Minister Malcolm Turnbull’s A$75B fiscal stimulus program appears to be heightening the appeal of the Australian dollar as the coalition government aims to boost job/wage growth, and the boost in public spending may encourage the Reserve Bank of Australia (RBA) to change its tune at its next policy meeting on June 6 as Governor Philip Lowe warns ‘interest rates in Australia will increase’ as the economy continues to transition from the mining boom.
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With that said, AUD/JPY appears to be carving an upward trending channel following the failed attempt to break below the 81.60 (61.8% expansion) support zone, and the pair may stage a larger advance over the coming days especially as the Relative Strength Index (RSI) breaks out of the downward trend carried over from December. The bullish RSI trigger keeps the near-term outlook tilted to the topside, with the first hurdle coming in around 84.60 (100% expansion) to 85.00 (100% expansion) followed by 85.60 (61.8% retracement).
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--- Written by David Song, Currency Analyst
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