AUD/JPY: Volatile price action ahead - Westpac

Sean Callow, Research Analyst at Westpac, suggests that trading ranges have tightened dramatically on AUD/JPY over the past month.

Key Quotes

“Even in June and July, the only really significant daily moves were in response to Brexit (down) and the two days after Japan’s upper house elections when the Nikkei surged on fiscal stimulus hopes (up).

Otherwise, both AUD/USD and USD/JPY are likely to keep a close eye on the Fed outlook, leaving AUD/JPY lacking firm direction. Our 1 month target of 78 assumes USD/JPY 102 and AUD/USD 0.77.

But there should be an increase in volatility in the month ahead, given the market tension over Fed and BoJ policy. If the Fed holds steady on 21 Sep as we expect then USD should slip against both AUD and JPY.

There is greater uncertainty over the BoJ decision just hours earlier. Governor Kuroda has raised the stakes by talking up a variety of easing options. But he has few easy choices, threatening another wave of yen buying and at the very least, volatile price action on AUD/JPY.”