Well, sort of.
After Wednesday’s initial enthusiasm for the pharmaceutical company Gilead’s COVID19 treatment, Remdesivir, the market returned back to risk off yesterday lunchtime. The ECB’s actions, or rather lack of action, left investors selling European stocks. That negative sentiment shortly flowed through into the US cash open and the previous gains were quickly replaced by yesterday’s losses. We also saw downside in copper prices, gold, silver, and platinum prices. the pitch was skewed by some pretty heavy month end flows into the JPY and the USD. However, when the dust has settled AUDJPY shorts look attractive.
The AUD is falling as US and European equity markets have fallen. As a high beta currency we can expect the AUD to lose value in line with the risk tone tilting off. As long as equity markets remain pressured then we can expect further AUD selling.
The JPY is receiving bids due to its safe haven status alongside the CHF and the USD.
Therefore, expect AUDJPY sellers on any rallies higher. The AUDJPY is at an interesting point technically. With price sitting underneath the 100EMA and in the daily gap from 06/09 March the AUDJPY has reached a natural infection point from its move higher. Stops can be places above the high of the 200EMA to limit risk and the Daily pivot point underneath at 66.00 make a fair place for a daily target.We expect this trade to play out over the next 2 or so weeks.
The main risk to this outlook:
Any positive news on COVID19 in relation to treatment/cure. Also, if Australia’s COVID case load continues to fall and this opens up Australia’s economy more quickly than others we can expect that to support the AUD.