Sell AUDJPY | Current Sentiment

Our trade call for the London session is to sell AUDJPY on a pullback to around the 83.70 region. Stop-loss and take-profit should be around 135 pips, but above levels of support or resistance. Last week’s long USDJPY would have been closed for locked-in profit when the BoJ failed to provide further easing.

Current Sentiment:

Early in the Asia-Pacific session, the RBNZ kept rates on hold at 2.25% which was expected with about 70% probability. Kiwi shot up on the back of the decision, given there was a chance priced in of a cut. The statement was similar to prior statements and maintained the strong easing bias. The RBNZ will likely cut rates at the next meeting in June. Kiwi rallied 125 pips on the news.

The yen saw massive appreciation across the board when the BoJ kept monetary policy unchanged. Many analysts were predicting an increase in easing measures at this meeting. The surprise of keeping monetary policy unchanged saw USDJPY drop over 300 pips immediately, and likewise dips in all yen pairs. The yen is likely to remain strong, especially if sentiment takes a risk-off tone. Analysts will likely be transferring their easing predictions to the next BoJ meeting, where the likelihood of action will be higher.

Also from Japan, we saw inflation figures, with Tokyo CPI ex-food & energy for April printing at 0.6% y/y, same as prior. The BoJ’s own measure of National Core CPI (ex-food & energy) for March printed at 1.1%, also same as prior. Inflation refuses to move higher in Japan.

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