Home Forex AUD/JPY Consolidates As Iranian Official Says No Immediate Retaliation Against Israel

AUD/JPY Consolidates As Iranian Official Says No Immediate Retaliation Against Israel

by SuperiorInvest
  • AUD/JPY holds after partial recovery of losses as an An Iranian official said there was no immediate plan to retaliate against the Israeli airstrikes.
  • The Japanese yen received support from hawkish remarks by BoJ Governor Kazuo Ueda on Thursday.
  • The Australian dollar lost ground as soft domestic jobs data reinforced the RBA's dovish outlook on monetary policy.

AUD/JPY continues to trade in negative territory after paring intraday losses on Friday. The risk aversion sentiment developed across financial markets, such as ABC News announced that Israeli missiles had hit a site in Iran. Earlier, the Japanese yen received a minor boost from Friday's release of Japanese inflation data. The National Consumer Price Index (CPI) rose 2.7% year-on-year in March, compared with a 2.8% increase in February, according to the latest figures from the Japan Statistics Agency. This index evaluates price fluctuations of goods and services purchased by households.

The Japanese Yen (JPY) received upside support from hawkish remarks by Bank of Japan (BoJ) Governor Kazuo Ueda on Thursday. According to a Reuters report Ueda he mentioned at a press conference that the central bank could consider raising interest rates again if significant declines in the yen substantially increase inflation. This underlines the influence that currency movements could have on the timing of the next policy change.

The Australian dollar (AUD) posted losses on Friday, along with declines in the ASX 200. In addition, yields on Australia's 10-year government bond fell below 4.3%, retreating from more than four-month highs. The retreat was attributed to soft domestic jobs data, which reinforced the Reserve Bank of Australia's (RBA) dovish outlook on monetary policy.

Daily Digest Market Movers: AUD/JPY weakens on dovish RBA outlook

  • Japan's national CPI, excluding fresh food but including fuel costs, rose 2.6% year-on-year in February, slowing from a four-month high of 2.8% in January and falling below estimates of 2.7%. The slowdown was attributed to modest increases in food prices, although they remained above the Bank of Japan's 2% target due to a weak yen and high commodity prices.
  • Bank of Japan board member Asahi Noguchi said on Thursday that the pace of future rate hikes is likely to be much slower than that of its global peers in recent policy tightening. That's because the impact of rising domestic wages has yet to be fully reflected in prices, Reuters reported.
  • Analysts at Rabobank suggested that stronger Japanese economic data, along with stronger expectations that the Bank of Japan (BoJ) may raise rates again later this year, were likely to give the Japanese yen (JPY) broad-based strength. They assume that if real Japanese household incomes turn positive later this year, there is a possibility of further BoJ rate hikes.
  • On Thursday, the Australian employment change published a value of -6.6 thousand for March, against the expected 7.2 thousand. and 117.6 thousand previously. Australia's unemployment rate rose to 3.8% in March, less than the 3.9% expected but higher than the previous reading of 3.7%.
  • According to the Westpac report, while the central bank has signaled it is unlikely to raise rates further, more confidence in the inflation outlook is needed before considering the possibility of a rate cut.

Technical analysis: AUD/JPY remains below 99.00

AUD/JPY traded around 98.20 on Friday. A break below the significant support level of 98.65 coupled with the 14-day Relative Strength Index (RSI) lingering below the 50 level suggests bearish sentiment for the pair. The AUD/JPY cross could find immediate support at the psychological level of 98.00. A break below this level could lead to an approach to the key 97.50 level. On the downside, the key level of 98.50, followed by the 50-day exponential moving average (EMA), appears as a barrier. A break above the latter could support the AUD/JPY cross to explore the region around the psychological 99.00 level.

AUD/JPY: Daily chart

Today's Japanese Yen Price

The table below shows today's percentage change of the Japanese Yen (JPY) against the major listed currencies. The Japanese yen was the strongest against the New Zealand dollar.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar -0.09% -0.07% -0.13% 0.05% -0.12% 0.15% -0.53%
euros 0.09% 0.01% -0.04% 0.14% -0.01% 0.24% -0.40%
GBP 0.07% -0.01% -0.05% 0.13% -0.02% 0.23% -0.42%
CAD 0.13% 0.04% 0.04% 0.18% 0.03% 0.28% -0.37%
AUD -0.06% -0.15% -0.13% -0.18% -0.15% 0.11% -0.55%
JPY 0.11% 0.03% 0.00% -0.03% 0.17% 0.25% -0.39%
NZD -0.15% -0.25% -0.24% -0.28% -0.10% -0.26% -0.65%
CHF 0.52% 0.41% 0.41% 0.37% 0.54% 0.39% 0.64%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

Risk Sentiment FAQs

In the world of financial jargon, the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to take during a reference period. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risky” market, investors start to “play it safe” because they are worried about the future, so they buy less risky assets that are more certain to produce a return, even if it is relatively modest.

Typically, during “risk-on” periods, stock markets will rise, most commodities – except gold – will also gain in value as they benefit from a positive growth outlook. Currencies of countries that are heavy commodity exporters are strengthening due to increased demand and cryptocurrencies are rising. In the “risk on” market, bonds go up – especially large government bonds – gold shines, and safe havens like the Japanese yen, Swiss franc and US dollar all benefit.

The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and smaller FX like the Ruble (RUB) and South African Rand (ZAR) all tend to rise in “risk on” markets. This is because that the economies of these currencies are heavily dependent on commodity exports for growth, and commodities tend to rise in price during periods of risk, as investors anticipate greater demand for raw materials in the future due to increased economic activity.

The main currencies that tend to rise during “risk-off” periods are the US dollar (USD), the Japanese yen (JPY) and the Swiss franc (CHF). The U.S. dollar because it is the world's reserve currency and because in times of crisis investors buy U.S. government debt, which is considered safe because the world's largest economy is unlikely to default. Only from the increased demand for Japanese government bonds, because a high share is held by domestic investors who are unlikely to issue them – even in times of crisis. Swiss franc, because strict Swiss banking laws offer investors increased capital protection.

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