Another week comes to an end in financial markets and we’re also rounding out the first quarter of the year. We’ve seen plenty of action over the first three months of 2022 and this week proved no different with several big moves to focus on. Chatting with traders ahead of the weekend, however, it seems the move capturing the most attention is the collapse in JPY this week. In terms of specific pairs, the almost 5% rally in AUDJPY seems to be the big one so let’s take a look at what caused the move and, as ever, if you caught it? Well done! If not? There’s always next week!
What Caused the Move?
Risk Sentiment Rebounds
The main driver behind this week’s move has been the ongoing pick up in risk appetite. Equities and commodities prices have been trading higher again this week, as markets continue to reverse (and in some cases, eclipse) the losses suffered in reaction to news of the war in Ukraine. While the conflict remains ongoing, it seems that markets are starting to price in an eventual ceasefire. With peace talks underway and both sides seeing plenty of reason to compromise, markets appear hopeful that a deal can be agreed. Indeed, both sides have expressed optimism over such a deal.
With risk appetite rebounding, JPY has seen a huge outflow of safe haven capital. JPY was initially much higher as news of the war broke and risk markets recoiled. However, higher beta currencies such as AUD are now taking centre stage once again while gold, JPY and other safe haven assets see weakened demand.
Additionally, the better risk backdrop is putting the focus back on hawkish RBA expectations. With Australia reopening again following two years of lockdowns, and with inflation surging, traders are anticipating that the RBA will soon be forced to join the ranks of the other G10 central banks who have already begun tightening.
Technical Views
AUDJPY
The triangle break in AUDJPY has been well and truly confirmed here with price now trading around 1000 pips higher than the point of the break. The recent rally has seen price blowing through 89.13 and 90.76. With both MACD and RSI firmly bullish here, the focus is on a continued push higher towards 92.65 next.
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.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.