Chart of the Day AUDJPY
AUDJPY Bullish - Probable Price Path
Wall Street appeared to be impervious to the rising number of US infections as market players focused on the prospect of US-China trade talks on telephone next week (after Trump tweeted “now they have to buy…if they don’t buy, we’ll terminate the deal, very simple”) and as initial jobless claims applicants eased to 3.17m last week. The S&P500 added 1.15% overnight, aided by energy, financial and material stocks, with the Nasdaq back in positive territory for the first time in two months. Meanwhile, UST bonds gained with the 2-year bond yield at a record low of 0.129% (overtaking the September 2011 low of 0.157%), 5-year yield also at a record 0.291% and the 10-year yield at 0.64%. The futures market is already pricing in negative US rates by early next year, albeit Barkin opined that it was not worth attempting negative rates. The 3-month LIBOR eased again to 0.43463% (lowest since December 2015) and LIBOR-OIS narrowed to 39bps.
AUD was bid with risk from the Asian open last night, as were Asian stocks, led by E-mini S&P up 1%. AUD traded +0.5% into the RBA's SOMP. The RBA forecast June GDP at -0.8%, which was a slight improvement on the April 21st forecast of 10%, due to recent progress to contain the spread of coronavirus. GDP is expected at -0.6% for December, +0.5% for December 2021 and +5% for June 2022 , which is more of a U than the V-shaped recovery, which was expected in the early days of the virus. The prediction contrasts with that of the Bank of England on Thursday, who forecast a 14% dip in 2020 and +15% recovery in 2021. The RBA stressed the uncertainty surrounding the predictions, due to the coronavirus, and repeated their readiness to scale up bond purchases to maintain their 3yr 0.25% yield target
From a technical and trading perspective, the AUDJPY reversed higher yesterday and flipped the daily chart bullish as per the Daily volume weighted average price. On the intraday charts look for a pullback to test bids toward 68.80/60 watch for bullish reversal patterns here this should then see long exposure rewarded on a move back through 69.60 en route to the primary upside objective of 70.80. On the day a close back through 68.60 would invalidate the bullish thesis opening a deeper decline to test bids back to the 68.00 handle.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!