The AUD/JPY pair seems to be finding quite a bit of support right around the 92 handle. This is interesting considering how poorly the Australian dollar has performed recently, socially against the US dollar. This to me shows just how weak the Japanese yen really is at this point in time. Remember, this is a higher-paying swap at the end of the day than most pairs. Because of that, there is a bit of a play in the realm of “carry trading”, something I thought I would never actually say again. However, this market has been sold off rather significantly, but we are starting to see a real bit of a base in this particular pair right around the aforementioned 92 handle.
At this point in time, you have to figure out whether or not the woes of the Australian dollar are so bad that they outweigh the woes of the Japanese yen. I think not, essentially because eventually people will begin to play the interest-rate differential again. On top of that, if we get some type of bounce from here, we could go as high as the 104 level and still remain well within the recent move.
Gold, AUD/USD, and the Japanese yen.
Obviously, gold has a significant effect on the value of the Australian dollar in general. And while the gold markets look really weak at the moment, the truth is that I believe this pair is focused solely upon the Bank of Japan and its actions to weaken the value of the Yen. Pay attention to the Australian dollar versus the US dollar as well, as it is starting to find a little bit of a base below the 0.90 handle. I do not expect this market to take off to the upside, just that the momentum has slowed down drastically for the sellers. That can translate over into this market, as you are simply trying to figure out which currency is weaker than the other. Watch the way they both trade against the US dollar for that answer, and simply apply it over here in this market. Nonetheless, I see no reason why this pair won’t eventually go much higher.
