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AUD/JPY Rises on Hopes for China’s Economic Recovery

AUD/JPY Rises on Hopes for China’s Economic Recovery

Market Overview

The Australian dollar (AUD) strengthened against the Japanese yen (JPY) following optimism surrounding China’s latest economic stimulus package. As China moves to implement its most significant economic support measures since the pandemic, commodity-linked currencies, particularly the AUD, are seeing a surge in demand.

This shift has bolstered risk sentiment among investors, driving the AUD/JPY pair higher. The yen, traditionally a safe-haven currency, faces pressure due to Japan’s ongoing economic challenges and the Bank of Japan’s (BoJ) accommodative stance.

Technical Outlook

On the technical front, AUD/JPY remains in an upward trend on the two-hour chart. Buyers have repeatedly tested the key 98.711 resistance level, signaling strong upward momentum. If they successfully maintain the price above this critical barrier, the pair could aim for higher targets at 99.030, 99.187, 99.482, and ultimately 99.801. However, the climb towards these resistance levels could experience some volatility as market conditions shift.

Momentum indicators like the RSI are in bullish territory, suggesting continued buying interest. Additionally, the MACD displays mixed signals but leans towards further bullish movement. The price also remains comfortably above key moving averages, confirming a supportive environment for buyers.

Alternative Scenario

Should sellers regain control, a move below the immediate support at 97.940 would signal a shift in momentum. A break below this level could trigger a downside correction, potentially erasing recent gains and setting the pair on a bearish path.

Key Levels Overview

  • Resistance Levels:
    • Resistance 1: 99.030
    • Resistance 2: 99.187
    • Resistance 3: 99.482
    • Resistance 4: 99.801
  • Current Price: 98.800
  • Support Levels:
    • Support 1: 98.711
    • Support 2: 98.326
    • Support 3: 97.940

Key Events to Watch

Investors will closely monitor several key events that could influence the AUD/JPY pair. The Reserve Bank of Australia (RBA) kept interest rates steady at 4.35%, in line with expectations, but traders are now awaiting Wednesday’s Australian inflation figures, which will provide further insights into the RBA’s future policy trajectory. Similarly, Japan’s Core CPI data, also due on Wednesday, will be crucial in determining the yen’s strength, as any signs of inflationary pressure could influence the BoJ’s policy outlook.

Additionally, the weak Japanese Manufacturing PMI, which remains in contraction territory, has also played a role in the yen’s recent decline. If inflation data from Japan shows persistent weakness, the JPY could face further downside pressure against higher-yielding currencies like the AUD.

Conclusion

The AUD/JPY pair is currently positioned for a continued upward movement, fueled by optimism over China’s economic recovery and broader risk appetite in global markets. Technical indicators support the bullish outlook, but buyers will need to clear key resistance levels to sustain the rally. Meanwhile, upcoming inflation data from Australia and Japan will be crucial in shaping the next direction for this pair, with a potential for increased volatility as the market digests these figures.

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