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Understanding AUDJPY

The AUDJPY pair works as a great barometer for gauging risk appetite in the markets. Given the Australian dollar’s link to commodity prices and the Chinese economy, AUD is very often a strong signifier of whether the markets are trading offensively or defensively.

Similarly, the Japanese Yen is a well-known safe-haven. The currency typically rallies during times of global uncertainty and poor economic performance. As a result, when AUD is rallying due to risk on behavior, JPY tends to trade lower and vice versa; when JPY is rallying due to safe-haven inflow, AUD tends to trade lower.

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So, what is the AUDJPY telling us right now?

After beginning the year above the 76 figure, on the back of a firm rally over Q3 2019 which was driven by positive expectations in the US/China trade space, AUDJPY has since reversed and traded as low as 72 before reversing to current levels just above 73...

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