AUDJPY takes a hit after the RBA and BoJ

<p>While most people in Australia were watching another leadership spill in Canberra, the Reserve Bank of Australia (RBA) released the minutes from its policy meeting […]</p>

While most people in Australia were watching another leadership spill in Canberra, the Reserve Bank of Australia (RBA) released the minutes from its policy meeting earlier this month. It noted that economic growth is below average and international developments have increased the risks to the downside for the outlook. The Australian dollar dropped on the back of minutes as it was a slightly more dovish tone than the market was expecting.

Meanwhile, the BoJ kept policy unchanged at its policy meeting this week, retaining its plan to increase the monetary base by JPY80 trillion annually and maintaining its optimistic view on the domestic economy. However, it altered its stance on the global economy by introducing a slightly more downbeat tone. It noted that exports and industrial production have recently been more or less flat, due mainly to the effects of the slowdown in emerging economies, as opposed to prior commentary about a pick-up in industrial production and exports.

Despite the BoJ’s slightly more dovish tone, the yen surged higher on the back of today’s statement. It seems the market was looking for an even more dovish statement and it’s not taking today’s subtle change in the view of the international economy that the bank will introduce more stimulus in the near-term.

AUDJPY sinks

A slight readjustment in the expected policy direction of both the BoJ and the RBA pushed AUDJPY back below 86.00. While both currencies are looking soft from a fundamental perspective, the aussie is looking more vulnerable in the near-term. There’s some bearish divergence between price and RSI on short-term charts, although it remains in a broad upward trend. Bears may want to wait for a possible break of this channel before joining the mauling.

AUDJPY

Source: City Index

 

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