The AUD/JPY pair went back and forth during the session on Tuesday, testing the 97.50 level. This is an area that I see somewhat significant support act, and now that we have formed a large range for the Tuesday session, I think that a break above the highs for the day should send this pair higher.
While the Australian dollar is in exactly a favored currency at the moment, the Japanese yen is even worse. So remember that Forex markets are all about measuring relative strength. While the Aussie is in exactly strong, at least is not the Japanese yen. That’s how you should think about this marketplace.
Ultimately, I believe that this market can probably go back to the 100 handle, but it might be a bit of a fight. The Japanese yen is very soft at the moment, and that’s probably the only thing that’s going to pushes market higher. We don’t necessarily have any strength coming out of the gold markets to influence the Australian dollar positively, so really at this point in time this is more or less a particularly vague “anti-yen” type of trade more than anything else.
Tricky but swap helps
The one thing that this pair does have going for it is that there is a positive swap for holding it overnight. That obviously will continue, so in that sense it does work out more or less as an investment. Ultimately, I have no interest whatsoever in owning the Japanese yen against any currency, even the lowly Australian dollar. On the other hand, if we did get a boost from the gold markets, this particular pair could be very interesting as it would be not only a higher interest currency, but a play on the gold markets directly.
Ultimately, I do think that we go to the 100 handle, but it won’t necessarily be the easiest trade to hold onto. You have to think of this as an investment, and probably trade small positions. You might add every time we did have on short-term charts, but ultimately this is something that you buy-and-hold, not trade quickly.
