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Japanese Yen Tumbles as US Dollar Soars, Australian Dollar Turns to the RBA Next

Japanese Yen Tumbles as US Dollar Soars, Australian Dollar Turns to the RBA Next

Daniel Dubrovsky, Contributor

Japanese Yen, USD/JPY, US Dollar, ISM Services, RBA, AUD/USD – Asia Pacific Market Open

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Asia-Pacific Market Briefing – Japanese Yen, US Dollar, ISM Services

The Japanese Yen broadly underperformed against its major counterparts on Monday. In fact, USD/JPY surged about 1.8 percent. If you look at the average daily performance since 2020, that was over +3 standard deviations from the average. In other words, such an event is very rare and often occurs when extended markets have a moment of realization.

A closer look at the chart below shows that USD/JPY climbed throughout the day as S&P 500 futures weakened and Treasury yields gained. The haven-linked US Dollar also soared on Monday. Newswires attributed this partially to the ISM Services Index unexpectedly beating expectations, clocking in at 56.5 in November from 54.4 in October.

The upbeat data also followed a rather strong non-farm payrolls report at the end of last week. With the Federal Reserve in a blackout period until next week’s interest rate announcement, markets likely priced in more hawkish monetary policy expectations. Anti-fiat gold prices also understandably weakened, with XAU/USD dropping 1.61%.

USD/JPY, S&P 500 Futures, 10-Year Treasury Yield on Monday

USD/JPY, S&P 500 Futures, 10-Year Treasury Yield on Monday

Chart Created in TradingView

Tuesday’s Asia Pacific Trading Session – Eyes on the RBA and Risk Appetite

With that in mind, the decline in the S&P 500 could allude to a rather disappointing session for Asia-Pacific markets on Tuesday. That is placing the ASX 200 at risk, which is also awaiting the Reserve Bank of Australia rate decision. The RBA is seen raising rates to 3.1% from 2.85% prior, continuing the slower pace of tightening. Softer October inflation could also underscore the case for a slower path of raising rates. That may bode ill for the Australian Dollar while benefiting the ASX 200.

Japanese Yen Technical Analysis

On the daily chart, USD/JPY has left behind a Bullish Engulfing candlestick chart pattern. Further upside confirmation could open the door to reversing the downtrend since the middle of October. Keep a close eye on the 20-day Simple Moving Average. The latter could hold as resistance, maintaining the downside focus. Otherwise, breaking back under the 78.6% Fibonacci retracement at 135 opens the door to downtrend resumption.

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USD/JPY Daily Chart

USD/JPY Daily Chart

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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