Asia's growth disintergrates further as JPY trade balance reveals more cracks
Bearish sentiment and overseas events are the more likely drivers for AUD crosses this week.
With AUD tumbling to 18-week lows after RBA cut rates and slashed inflation forecasts, MI consumer inflation expectations tomorrow are unlikely to send any further shocks to Aussie traders, leaving Japanese data the more likely catalyst for a reprieve.
The combination of Japan’s trade balance data and Kuroda speaking on Thursday will likely dictate which side of the 80 handle AUDJPY it closes this week. With the Finance Ministry upping their verbal intervention to ward off speculators and weaken the Yen, an upside surprise may be on the cards for the cross. However, with the trend clearly down and bearish sentiment on AUD dominating, then a bullish close this week will only be a minor victory at best. It really boils down to how successful BoJ are with weakening the Yen as to high AUDJPY can climb before attention turns to domestic news flows.
RBA minutes and employment will be firmly on the trader’s radar next week to assess the likelihood and timing of further cuts. Now inflation forecasts are drastically lower, it will only take an uptick in unemployment for AUD bulls to scramble for the exits once more to send the Aussie lower.
Having tested 18week lows, momentum traders will likely see any AUDUSD rallies towards 0.742 or 0.75 are likely to be viewed as an opportunity to position themselves short again. However, now we have broken below the 200 eMA the lower resistance level will be very tempting for bears to hop on board.
The Feb high at 0.726 will be an important level for bulls to defend, with a break below likely to target 71c and 70c.
Bank of Japan in focus for AUD sentiment
Bank of Japan may help AUDJPY with a bullish close if they successfully weaken the Yen but price action on AUDUSD is likely to remain bearish below key resistance levels close by.