AUD/JPY drops to 74.85 despite RBA’s “no rate change” decision
- AUD/JPY weakens after RBA cited downside risks to the global economy.
- Trade positive headlines have been beefing up the market’s risk-tone off-late.
With the Reserve Bank of Australia (RBA) citing downside risk to the global economy, AUD/JPY declines to 74.85 by the press time of early Tuesday.
The Aussie central bank left the current monetary policy unchanged while citing risks to the macroeconomy and a gentle turning point at the domestic front.
Read More: RBA: Will ease policy if needed to support sustainable growth
Risk tone holds on to recovery amid positive headlines concerning the US-China trade deal. Following the US President Donald Trump’s “We’re so close” statement, China’s President Xi Jinping showed the need to bring down trade barriers during a press conference at the annual general party meeting, as per Reuters.
The Financial Times (FT) story suggesting the United States (US) administration mulling to scale back some of the tariffs on China and comments from French President Emmanuel Macron also speak of positive trade sentiment.
With this, the US 10-year treasury yields take rounds to 1.80% while Asian equities also trade positively on the return of Japanese traders from holidays.
Also contributing to the pair’s upside is the comments from the Bank of Japan’s (BOJ) Governor Haruhiko Kuroda that confirms stability in the central bank’s future monetary policy actions despite the recent reduction in the Japanese Government Bond (JGB) purchases.
Given the initial reaction to RBA’s monetary policy decision, investors will now concentrate on Friday’s Statement of Monetary Policy (SOMP) for fresh direction concerning the central bank’s near-term growth/inflation forecasts. However, trade/Brexit headlines will keep driving prices in the meantime.
Technical Analysis
A two-week-old rising channel between 74.50 and 75.50 keeps prices positive despite intermediate pullbacks. In a case of either side breaks, 50-day Simple Moving Average (SMA) around 73.30 and July month high near 76.30 could please the traders.