AUDJPY is currently my favourite pair to trade due to the Australian Dollar's strength during the summer commodities season, coupled with the Japanese Yen's recent losses. This pair is due to see further gains.
The following is my analysis on why I'm bullish on this pair:
AUD strength during commodities season - Over 20% of Australia's exports are commodities. If you compare the commodities index (SPGSCI) chart with the Australian Dollar Index (AXY) you will see that both asset classes move in a very similar direction in the mid - long term. Currently Oil prices are expected to continue their gains as we are in the summer months where Oil demand is much higher with a peak expected in September - October. Oil prices have a massive influence the wider commodities prices. As a result, I expect the AUD to maintain stable gains over the next month.
JPY weakness and Bank of Japan intervention - The Bank of Japan (BOJ) intervened in the currency markets in 2024 by purchasing Yen to prevent significant losses against the USD. This intervention aimed to stabilise the Yen amidst growing economic pressures and market volatility. Central bank interventions are a short term solution to a long term problem, and the currency usually continues to see losses even after the interventions. We have seen this happen previously when the BOJ intervened in 2022 and Russia when they faced sanctions in 2022 from the war in Ukraine. As a result, I expect JPY to continue its losses. Short term rallies on the Yen will see further opportunity for traders to sell.
Risk to consider - The biggest risk with AUDJPY or any currency against the JPY is another BOJ intervention. The BOJ does not release when and at what price they will intervene at. However, once the intervention is complete, prices start to stabilise again before gains continue.
Interest rates:
Australia Real Interest Rate: 4.35% (Cash Rate) - 3.6% (Inflation Rate) = 0.75
Japan Real Interest Rate: 0.1% (Cash Rate) - 2.8% (Inflation Rate) = -2.7% (Negative Rate)
Current interest rate adjusted for inflation is on favour of the AUD (0.75 > -2.7)
As AUD rates are higher than Japan's, more money is flowing out of the JPY and into the AUD. Based on this, we can expect AUDJPY to continue moving higher. It's important to know that Japan's inflation rate has been climbing since September 2021. As long as Japan's inflation rate remains high and the interest rate differential is wide, this pair will continue to see gains for at least up until Mid 2025.
In summary, I am only looking to buy this pair on intraday plays :)
The following is my analysis on why I'm bullish on this pair:
AUD strength during commodities season - Over 20% of Australia's exports are commodities. If you compare the commodities index (SPGSCI) chart with the Australian Dollar Index (AXY) you will see that both asset classes move in a very similar direction in the mid - long term. Currently Oil prices are expected to continue their gains as we are in the summer months where Oil demand is much higher with a peak expected in September - October. Oil prices have a massive influence the wider commodities prices. As a result, I expect the AUD to maintain stable gains over the next month.
JPY weakness and Bank of Japan intervention - The Bank of Japan (BOJ) intervened in the currency markets in 2024 by purchasing Yen to prevent significant losses against the USD. This intervention aimed to stabilise the Yen amidst growing economic pressures and market volatility. Central bank interventions are a short term solution to a long term problem, and the currency usually continues to see losses even after the interventions. We have seen this happen previously when the BOJ intervened in 2022 and Russia when they faced sanctions in 2022 from the war in Ukraine. As a result, I expect JPY to continue its losses. Short term rallies on the Yen will see further opportunity for traders to sell.
Risk to consider - The biggest risk with AUDJPY or any currency against the JPY is another BOJ intervention. The BOJ does not release when and at what price they will intervene at. However, once the intervention is complete, prices start to stabilise again before gains continue.
Interest rates:
Australia Real Interest Rate: 4.35% (Cash Rate) - 3.6% (Inflation Rate) = 0.75
Japan Real Interest Rate: 0.1% (Cash Rate) - 2.8% (Inflation Rate) = -2.7% (Negative Rate)
Current interest rate adjusted for inflation is on favour of the AUD (0.75 > -2.7)
As AUD rates are higher than Japan's, more money is flowing out of the JPY and into the AUD. Based on this, we can expect AUDJPY to continue moving higher. It's important to know that Japan's inflation rate has been climbing since September 2021. As long as Japan's inflation rate remains high and the interest rate differential is wide, this pair will continue to see gains for at least up until Mid 2025.
In summary, I am only looking to buy this pair on intraday plays :)
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.