AUD/JPY: AUS CPI, BoJ 'Double Whammy' for Sellers

AUD/JPY: AUS CPI, BoJ 'Double Whammy' for Sellers

28 April 2016, 06:22
Roberto Jacobs

AUD/JPY: AUS CPI, BoJ 'Double Whammy' for Sellers

Traders short AUD/JPY continue to celebrate this week's volatile moves in the market, with today's BOJ-induced sell-off in the pair adding to the losses seen 24h ago when the Australian CPI Q1 came shockingly low.

Sellers could not dream of a better week

AUD/JPY exchanges hands around 82.85 lows at present, having seen a minor bounce at 82.50 weekly lows, prior to a violent sell-off in response to the BOJ policy announcement. If one measures the extension of the decline from this week's highs just below 86.50 to today's lows, it is almost 400 pips, erasing the hard-earned pips from buyers ever since building positions off April 8th lows below the 82.00 handle.

Kuroda misses an opportunity to keep weakening the Yen

The aggressive selling is entirely attributed to the major disappointment that meant an unchanged policy outcome by the BoJ, after speculation had been building up that Governor Kuroda would probably act yet again in a bold manner in order to both alleviate the negative rates introduced late Jan (talk was of negative rates on BOJ loans) and assist the relief rally in USD/JPY. None of this has come to fruition and the market has understandably sold the Nikkei 225 and bought Yens as a result.

AUD/JPY key levels

Immediate support is now found at 82.50 ahead of 82.00 round number, with a break below the latter most likely exposing 81.70, which represents today's S3 line. On the upside, given the significance of both fundamental outcomes (odds of an RBA rate cut in May near 50% and market disappointment with BOJ outcome), any correction should be fairly limited before sellers decide to potentially engage in additional momentum-led selling campaigns intraday, despite the overstretched nature of the bear moves this week. Watch 83.00 and 83.50 as key levels where selling may resume.


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