Potential signal:
- I am a buyer of this pair above 114, with a stop at 113, and a target of 118.50 above.
The Australian dollar rallied a bit during the early part of Monday trading, as the Aussie continues to show overall stability. The yen, on the other hand, remains weak.
AUD/JPY
The Australian dollar rallied a bit during the early part of the trading session on Monday as we are testing the 114-yen level. Keep in mind the Australian dollar is generally speaking strong and continues to be a market where the 114-yen level continues to attract a lot of attention. But if we were to break above there, then I think it brings in more momentum.
Top Regulated Brokers
And with this, you have a situation where the 50-day EMA underneath offers a bit of support and could be a short-term floor. If the market were to break down below the 50-day EMA, then the market could drop down to the 112-yen level. This is an area that I would expect a certain amount of support in, and I will be watching closely.
Risk Appetite and Long-Term Yield Drivers
Ultimately, this is a market that will remain very noisy and very sensitive to risk appetite, as risk appetite, generally if it's positive, will favor the Australian dollar, as it's highly tied to commodities. And of course, we have seen for years the Japanese yen being touted as a currency for safety, under normal circumstances.
The interest rate differential will continue to send the Australian dollar higher over the longer term, more likely than not. And you get paid to hold onto this pair if you do, in fact, go long. It is because of this that I am bullish on this market, but I also recognize that there is a lot of noise above that could really cause quite a bit of problems. Ultimately, I expect volatility, but given enough time, I do believe that this market breaks out to the upside, and perhaps even runs as high as 120 over the longer term.
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