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AUDJPY: A Dovish RBA Could Send the Pair 600 Pips Lower

AUDJPY was higher on Monday as the market bounced from Friday’s close below support. The Reserve Bank of Australia announces interest rates tomorrow and the technical setup could see a 600 pip move lower in the days ahead if the bank surprises markets.

Economists are suggesting that a 0.15% rate cut in Australia is fully priced-in to the exchange rate and that would bring Aussie rates to 0.1%. The market is also expecting the RBA to announce a large-scale bond buying program after officials discussed the merits of bond buying in recent speeches. Analysts are looking for a on program that would be in the region of AUD$140bn but others are not expecting any such measures.

Morgan Stanley’s David Adams said that the,

“risk skew is toward a hawkish surprise, not a dovish one”.

The Yen also has the benefit of being a safe haven currency and tomorrow also sees the U.S. election, which could end up being the most highly-contested in history. Trends suggest a record voter turnout and polls are mixed with some predicting a comfortable win for Biden and others, a comfortable win for Trump. We also Brexit in the background, alongside further virus lockdowns, so the catalysts for safe haven flows are many. 

AUDJPY Technical Outlook

The AUDJPY closed below the 74.00 low support level on Friday and is testing the 50-day moving average. If the price moves below this then support at 68.00 could be the next target. Traders could go short with a stop above the Friday high. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.  

AUDJPY Daily Chart