This morning, the AUD/JPY rate dropped below 95.2 yen per Australian dollar for the first time since late October.
The weakening of the AUD was contributed by:
→ negative news regarding the Chinese economy. The Hang Seng Index set its 2023 low yesterday;
→ Australian GDP data published yesterday, which is growing at a weaker-than-expected pace.
And the strengthening of the yen occurs against the backdrop of expectations of an increase in interest rates in Japan, which intensified according to the statement of the head of the Bank of Japan. Kazuo Ueda said yesterday the central bank has several options for targeting interest rates once it gets short-term borrowing costs out of negative territory.
At the same time, the AUD/JPY chart shows that:
→ the rate has reached important support from the lower border of the channel shown in blue;
→ the rate has broken through the level of 96.25, and now the level may act as resistance;
→ RSI dropped into the extreme oversold zone. This increases the temptation for bears to take profits.
Given these factors, it is reasonable to assume that the market is vulnerable to a short-term bullish correction after a strong downward impulse. However, if the current fundamental background does not change, it is possible that the strengthening yen will break through important support in the pair against AUD in December (which is also true for other currencies).
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