Risk off flows and downbeat Australian CPI pressure AUD crosses today.
Does this mean another bearish wave for the AUD/JPY?
Before we go any further, ICYMI, Yesterday’s Watchlist looked at a short-term pullback in AUD/USD ahead of the CPI release. Be sure to check if it’s still playable!
And now for the main headlines that rocked the markets in the last trading sessions:
Headlines and recent economic data for the market:
Banking sector fears return as First Republic considers selling $100 billion in assets amid $72 billion in deposits in the first quarter
The US Richmond manufacturing index fell from -5 to -10 versus estimates of -8, as shipments shrank while prices rose in April.
US CB Consumer Confidence fell from 104.0 to 101.3 instead of improving to the 104.1 consensus, as the economic outlook component fell
Australia’s consumer price index for the first quarter fell from 1.9% qoq to 1.4%, dragging annual inflation down from 6.8% to 6.3% vs. 6.5% expected
New Zealand credit card spending slowed from 25.5% yoy to 20.3% in March
German GfK Consumer Confidence improved from -29.3 to -25.7 vs. -28.0 forecast, as income expectations rebounded significantly in April
Price action news
The high-yielding Australian dollar was already selling off, along with other risk assets, as banking sector woes returned to the spotlight during the New York session.
As it turns out, First Republic Bank is struggling to stay afloat after depositors withdrew nearly $72 billion from their coffers in the first quarter of the year.
This resulted in a flight to safety that the US dollar mostly benefited from before taking profits towards the end of the session.
However, trading hours in Asian markets led to another wave of declines for AUD crosses when Australia released a downbeat CPI report, further dampening the RBA’s hopes.
Possible catalysts coming in the economic calendar:
US Core and Core Durable Goods Orders at 12:30 PM GMT
EIA Crude Oil Inventories at 2:30 pm GMT
Australian import prices at 12:30 am BST (Apr 27)
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AUD/JPY 15-minute forex chart by TradingView
This forex pair has been heavily sold over the past few hours, but seems to be finding a bit of support around the 88.20 region near the previous day’s lows.
If the sellers need to take a quick breather here, we may see a slight pullback to the nearby resistance levels.
I have my eyes fixed on the 61.8% Fibonacci retracement level which is near the short term downtrend line and area of interest.
But given how intense the selling has been and the potential for risk aversion flows to pick up again, the AUD/JPY could be in for a minor pullback or another sharp crash.
The former could provide an opportunity for more sellers to jump at the 38.2% Fibonacci retracement level that goes along with the pivot point (88.96) while the latter could lead to the formation of new lows all the way down to R2 (87.19).
Make sure you check out Average daily volatility for the Australian dollar / Japanese yen pair If you plan to trade in this!
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