Our forex strategists discussed setups around the monetary policy statement from the Reserve Bank of Australia, and the latest inflation updates from the U.K.
Out of the four scenario/price outlook discussions this week, only one discussion saw both fundie & technical arguments triggered to become a potential candidate for a risk management overlay. Check out our review on that discussion to see what happened!
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AUD/JPY: Monday – June 17, 2024
AUDJ/JPY 1-Hour Forex Chart by TradingView
On Monday, our strategists kicked off the new week with a chat on the Aussie. They dove headfirst into the Reserve Bank of Australia’s (RBA) monetary policy meeting, knowing it could really shake things up for the Australian dollar.
Inflation rate growth in Australia has been a bit stubborn, so most folks expected the RBA to keep things steady this time. But hey, no action doesn’t mean no excitement! We figured those inflation and economic forecasts they’d throw out after the interest rate statement would likely cause forex traders to wake up and start a bit of a ruckus for the Aussie.
If the whole thing turned out to be a net dovish affair (meaning rhetoric signaling the RBA’s lean towards looser policy ahead), we had our eyes on a bearish bias on AUD against the New Zealand dollar. The Kiwi’s been showing some bullish moves lately, making it a good potential counter-punch against a short Aussie position.
But if the RBA came off with net hawkish vibes (e.g., “higher for longer” rate outlook / potential need for tighter policy), we were all about the Aussie and yen long combo. The RBA and the Bank of Japan are on way different interest rate levels, plus that pair’s been trending up nicely, so a hawkish RBA event could draw in both fundie and technical bulls.
Well, the big day for the Aussie came and as expected, the Reserve Bank of Australia kept its official cash rate at 4.35% for a sixth meeting in a row in June. The reaction was unexpectedly muted initially, likely due to traders waiting for the press conference before establishing a bias lean.
And that looks like that was the case as AUD/JPY took off an hour following the statement releasing, likely due to comments from RBA Governor Bullock that the Board did discuss the case for increasing interest rates due to the increased upside inflation risks and inflation expectations.
Given how this all played out, it’s “highly likely” this discussion was supportive of a net positive outcome as AUD/JPY steadily moved higher all week following the RBA event, with little very resistance from sellers along the way.
And even following the press conference, traders who jumped in the fundamental & technical long scenario a bit late still had a chance to catch a roughly two ATR move as the pair rallied another 150 pips going all the way into the weekend.
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