The Australian dollar has rallied during the Asian session on Monday, as we see a lot of interest rate-savvy investors testing the Bank of Japan and its recent actions.
AUD/JPY
The Australian dollar has rallied early on Monday against the Japanese yen as traders continue to press the Bank of Japan and its recent intervention actions. After all, the Americans and the Japanese came in to protect the Japanese yen last week, but we've since seen the market recover about half of the losses.
All things being equal, the interest rate differential between Australia and Japan continues to be a major driver here, and that does make a certain amount of sense considering that the Japanese yen is one of the most commonly used currencies for a carry trade. This doesn't mean that we can't get intervention sooner or later. It's just that the market has seen the Japanese intervene a couple of times, and every time they do, traders come back in and start shorting the yen, buying other currencies.
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Key Support Levels and Market Momentum
So, with this being said, I think you have a situation where traders continue to see a buy-on-the-dip type of mentality play out. It looks as if the 110 yen level has offered support right along with the 200-day EMA, which is a significant indicator that a lot of people use to determine the trend. The 114 yen level above continues to be one of importance and a potential target as it has been a massive resistance barrier over the last several months.
So, with that being said, I suspect you have a situation where traders continue to look like they are trying to find the momentum to start chasing. If we get sold off again, it's very difficult to guess as to how people will behave, but the last 3 times we've seen buyers come back.
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