AUDJPY is a pair that could be about to register decent gains over the coming weeks for the following reasons:

  1. Australian dollar shorts look very stale. Last year Australia’s economy was hit by COVID concerns and a slowing Chinese economy weighed down by default fears from the property sector. Those risks are fading as China is boosting its economy now with the PBOC cutting rates and more fiscal stimulus expected.
  2. The RBA has met its three targets at its last rate meeting and the obvious next step is to hike interest rates.
  3. The Bank of Japan has promised to buy an unlimited amount of JGB’s in order to keep the yield between +0.25 and -0.25%. Now while other central banks are seeing their yields surge higher the BoJ is keeping their bond yield low. This structurally should keep the JPY weak.
  4. Japanese inflation is still well below the BoJ’s 2% target, so there is limited inflationary pressure on the BoJ to change policy tact.

AUDJPY has a period of strength from March 19 through to April 11 with gains in 10 years out of the last 15 years. The average return has been +2.37% and the annualised return was +44.99%.

Major Trade Risks: The main risk here is any geopolitical risk, most likely from the ongoing Russian/Ukraine crisis, which can result in strong bids coming into the JPY.