AUD/JPY could re-test the July lows near 74 - Westpac

Sean Callow, Research Analyst at Westpac, notes that the trading ranges continue to tighten on AUD/JPY and over the past three months, the only significant daily moves were the two days after Japan’s July upper house elections when the Nikkei surged on fiscal stimulus hopes (up) and the day of the 29 July BoJ meeting (down).

Key Quotes

“Even last week’s keenly anticipated BoJ meeting had limited net impact on AUD/JPY.

Both AUD/USD and USD/JPY are likely to keep a close eye on the Fed outlook, though there seems to be more fresh air below on USD/JPY than above on AUD/USD. Our 1 month AUD/JPY target of 75 assumes USD/JPY 98 and AUD/USD 0.77.

With little tension over the RBA cash rate until at least November and the BoJ only just having adjusted policy, yield differentials should not be a key driver of AUD/JPY in the next few weeks.

As always, the pair will be a risk barometer (recall the 9 yen trading range on the Brexit vote), so there remains an ongoing asymmetry to global risk appetite. Should market volatility pick up ahead of the US presidential election on 8 Nov, AUD/JPY could re-test the July lows near 74.”