AUD/JPY – where next for the pair from the 76.87 point?

The Australian dollar has been riding high in the markets recently after a move away from the perceived safety of the greenback led to take-up for riskier currencies.

Last week, the Aussie managed to score its best performance in more than a year against the safe-haven Japanese yen, reaching 76.87 at one stage.

This level, not seen for a year and two months, was later undermined a little.

However, the Aussie managed to finish the week up by over half a percentage point.

According to some strategists, the technical indicators are suggesting that a close eye needs to be kept on short-term trading.

Watching the pair in a four-hour trading view is being suggested as a wise move by some.

The currency is hovering close to the 75 level, which is often seen by traders as a mental trigger.

Charts suggest that if it breaches this level, then it could fall as low as 74.68.

Some analysts also noted that there is a so-called ‘double top’ feature on the chart close to 72.53.

If the pair was to drop towards the less high end of the present range, then this could come into play.

In the opposite direction, however, it would probably have to go up to the 75.61 region in order to get close to chances of 76.00.

Looking more broadly than the technical indicators, meanwhile, it becomes clear that the next few days are busy ones for the Australian dollar and the Japanese yen.

The Aussie will have to contend with a building permits release covering June at 1:30am GMT on Thursday.

This release is, however, likely to show a welcome rise month on month – from -16.4% to 0%.

If this materialises, it could suggest that the construction sector in the country is enjoying a rise despite the pandemic continuing to pose problems in major Australian cities such as Melbourne and Sydney.

Trade balance data will also be out at the same time.

Import price index data for Q2 will be released: this was last recorded at -1% on a quarter-on-quarter basis.

Export price index data for the same period, meanwhile, will also come out then.

This was last recorded on the same basis at 2.7%.

Looking ahead to Friday, meanwhile, the Aussie may also be affected by a release looking at private sector credit extended in June.

Month on month, this is set to show a change from -0.1% to +0.2%.

In Japan, meanwhile, Friday morning is set to bring a consumer confidence index for July.

This will be released at 5am GMT and is expected to reveal a fairly big jump from 28.4 to 32.7.

In the same time slot, meanwhile, will be a Japanese housing starts release for June.

This is due to show a year-on-year change from -12.3% to -13.7%.

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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