The lucky country does it again: AUD/JPY

A day to be sure when Australia has lived up to its reputation of the “lucky country” following a trifecta of good news.

FOREX 3

Following a positive lead from offshore equity markets overnight, the ASX200 has built on yesterday’s break higher, trading to fresh 11 months highs, above 6800.

There is now little in the way of resistance until 6880/6900, an achievable upside target.  

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Following another day of zero community transmission in Australia, restrictions are set to ease across the states of NSW, QLD and SA. While no formal number of permissible COVID-19 new daily cases has been announced by any state Premiers, it’s becoming clear that outside of NSW that number is zero. In which case, the forthcoming easing in restriction should be enjoyed now in case they are only temporary.

Finally, this morning’s jobs report for December provided an encouraging set of numbers. Employment rose by +50k, bang in line with expectations but the unemployment rate eased lower to 6.6% from 6.8%, well below the RBA’s latest forecasts of 8%.

Also notable, the participation rate rose to a historical high of 66.2% and the underemployment rate that measures the degree of slack in the labour market (the shortfall between the volume of work desired by workers and the actual volume of work available) fell sharply, from 9.4% to 8.5%.

When combined with the favourable international backdrop including another round of stimulus in the US and a plan to enact a massive wave of infrastructure spending, overlayed with benign risk sentiment and strong commodity prices, the backdrop for AUD/JPY is favourable.

Technically, AUD/JPY appears to have completed a corrective retracement in January from the 80.93 high to the 79.50 low. The 79.50 low picked up nicely the uptrend support coming from the late October, 73.13 low.

Providing AUD/JPY remains above support at 79.50ish, we favour holding longs in expectation of a retest of the 80.93 high, before a rally towards 81.50.

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The lucky country does it again: AUD/JPY

Source Tradingview. The figures stated areas of the 21st of January 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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