Australia is facing a number of strong headwinds going forward. Firstly, the country has a relatively low vaccination rate with only 15% of the population being fully vaccinated. Secondly, global emission concerns have led China to limit steel production. This has caused Iron Ore prices to fall sharply. As Iron Ore is Australia’s largest export and 80% of it goes to China this will likely weigh on the Australian dollar. Thirdly, growth for Q3 is expected to weaken as the delta variant spreads more widely.

Finally, notice that AUDJPY tends to have a very weak August, so any risk-off tones could weigh heavily on the pair. Between August 01 and September 01 AUDJPY has fallen in value 15 times over the last 21 years. The largest fall was in 2008 with a -8.25% loss. The biggest gain was in 2020 with a 3.45% profit. The average return has been -2.07%.

Key Trade Risks:

  • Any sharp pickup in China’s growth prospects would strengthen the outlook for AUDJPY upside.
  • Any pick up in Steel production would also lift Iron Ore prices and the AUD with it.