Chart of the Day AUDJPY

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AUDJPY 2018 Redux

US equities rose sharply in volatile trading on Tuesday as market participants weighed the prospects of fiscal stimulus to curb slower economic growth stemming from the COVID-19 outbreak. US Vice President Pence said the Trump administration proposed to lawmakers a coronavirus stimulus package that includes payroll tax relief. He added that the administration wants small and mid-sized businesses to have resources to provide paid leave and wants liability reforms so masks made for industrial use can be used in hospital settings.

Australia consumer confidence slid on Covid-19: The Westpac Consumer Confidence Index fell 3.8% MOM to 91.9 in March (Feb: 95.5), its lowest level in more than five years as consumer sentiment turned markedly poorer in response to the outbreak of Covid-19 worldwide and domestically.  

Home loans beat estimate, indicating strong momentum in Australia housing recovery: Australia approved home loans value topped estimate to record a rather stable 4.6% MOM growth in January (Dec: +4.5%), reflecting a large gain in loan extended to investors (+3.6% vs +3.0%). Owner-occupier loan value managed to post a consistent and solid increase of 5.0% MOM (Dec: +5.0%), indicating the strong momentum of the housing sector ongoing recovery. 

From a technical & trading perspective the AUDJPY often trades as a proxy for risk sentiment in equity markets. As such with equity markets attempting to make an initial reaction low after the initial panic decline, it is reasonable to expect at a minimum a bear market rally would be a plausible next phase, before the potential for a more sustained decline plays out. The AUDJPY along with equity indices discussed in this week’s analysis for S&P500 and the Nasdaq, prices appear to be trading in a similar fashion to the late 2018 dramatic decline, a recovery n the AUDJPY could ascend towards the 78.6% Fibonacci retracement area. As such contrarian players should take encouragement from an upside breach of the 69.00 level setting up a test in time of the 74.00 level before a decision point comes into play.

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