AUD Turns Weak after Dovish Stance by RBA Governor

Australian DollarAustralian Dollar was able to reverse the downtrend policy against Yen in September’s 2nd week because of robust employment data. The reversal was also supported by a reduction in the Japanese industrial production.

The AUD/JPY currency pair has risen to a high 1.4730 from 1.4460 since September 14. We are hopeful that the currency pair is going to grow in the current week and the reason for same is discussed below.

Philip Lowe who is the Governor of Reserve Bank of Australia while speaking to the audience last Thursday at American Chamber of Commerce said the rise in the global interest rates would not have any impact on the Australian economy in the coming future.

It signifies that the Australian central bank is not going to increase the interest rates in the future. The price of interest for the 13th consecutive month was kept unchanged at 1.5 percent.

The iron ore price (62% Fe) in the past two weeks has declined to an all-time low figure of $63 from $80. This weakness in the price of iron ore is likely to last longer as China continues shutting down excess steel capacity. Australia exports 70% of its iron ore to China, and the weakness in iron ore prices would make the Australian Dollar turn weak.

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The aforementioned similar thoughts are expressed by Peter Dragiecevch who is an analyst at Nomura. He said that Australian dollar is under tremendous pressure because of the hawkish stance by Fed and credit rating downgrade of China by S&P. As China is a major export partner of Australia, the decline in the imports from the former country will have a bad impact on the Australian dollar. On the other hand, Yen is likely to move upward because of lack of inflationary pressure and geopolitical developments in Japan.

North Korea on Friday has threatened that it would test another hydrogen bomb over the Pacific Ocean. Yen which is considered as a safe-haven currency is likely to strengthen not because investors are anxious about the war. It is because the investors are worried about the decline in sales of vehicles and homes because of low consumer confidence. Shinzo Abe who is the Japanese Prime Minister came to power in the year 2012, and he promised to enhance the inflation. But the positive effects are yet to be seen as Japan is struggling with variable consumer prices.

HSBC analysts think that Yen would soon return to its fair value against the US Dollar, as the strategy implemented by Abe’s government has not produced any viable results. Hence, Yen is likely to rise in power against major currencies of the world. Therefore based on the discussions above, we believe that the AUDJPY currency pair would decline.

The currency pair was not able to break the resistance level of 89.20 as on Friday. The momentum indicator is also way below the zero mark. The next support exists at 87.80. Hence, the decline is currency pair is quite evident.

AUDJPY Pair Sept 25th 2017

AUDJPY Pair Sept 25th, 2017

To gain from the downtrend of the currency pair, traders are recommended to open a short position in the currency market. Traders should target an entry near 89.40 and place stop order above 90.40. The short position would be covered near 87.80.

Likewise, traders are advised to purchase a put option as well. The Option should have an expiry period on October 4. In addition to this, the currency pair should trade near 89.40.

AUD Turns Weak after Dovish Stance by RBA Governor
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AUD Turns Weak after Dovish Stance by RBA Governor
RBA governor’s dovish stance and a sharp decline in the price of iron ore turns the Aussie weak, while the Yen rises on geopolitical tensions.
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Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.

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