While Dollar is treading water ahead of FOMC rate decision, AUD/JPY is stealing the show as the top mover as markets enter into US session. Aussie’s selloff is gaining some momentum as markets continue to digest lower than expected CPI reading from Australia released earlier today. There are increasing calls for RBA to stand pat again on August 1, i.e. next Tuesday.
On the Japanese front, despite the prevailing anticipation that BoJ will maintain its monetary policy and yield curve control unchanged on Friday, traders might be rethinking their positions. This follows the advice of IMF’s Chief Economist encouraging BoJ to start planning for rate hikes and gradually distance itself from YCC. BoJ’s track record of catching the market off guard—acting when least expected and remaining idle when action is anticipated—complicates any definite predictions.
Anyway, the break of 94.63 minor support indicates that AUD/JPY’s corrective recovery from 93.22 has completed at 95.84 already, after hitting near term falling trend line resistance. Deeper fall is expected to retest 93.22 support first. Firm break there will resume the whole decline from 97.66.
Fall from 97.66 could be interpreted as a correction to rise from 86.04, or the third leg of the medium term pattern from 99.32. In either case, the next near term target after decisively breaking 93.22 will be 100% projection of 97.66 to 93.22 from 95.84 at 91.40.
