The dollar softness in the past few days is certainly one reason for the push higher but the aussie itself is showing some resilience since dipping below 0.7200 briefly at the end of September trading.

Risk sentiment has been a bit more mixed this week but today’s more optimistic mood won’t hurt the aussie’s charm whatsoever, which I would argue has more to do with rising commodity prices in recent weeks more than anything else.

Adding to that is perhaps the technical breakout in AUD/JPY as the pair climbs to its highest since July above 84.00 currently, after having broken above key resistance levels from the September highs close to 82.00 at the start of the week.

So, what’s next for AUD/USD?

The 100-day moving average (red line) @ 0.7413 poses the first immediate resistance for now so buyers will have to try and hold a break above that to keep the upside run going. The September highs @ 0.7469-78 will then be the next key test.

In the big picture, I’m not a big fan of the aussie but the technicals are hard to ignore and considering the climbdown from 0.7700 to nearly 0.7100 since June, there has been a modest downside move played out already for the currency.

The COVID-19 situation is also likely to get better as vaccinations are inching closer towards the 80% rate for NSW and Victoria states. So, that isn’t going to pose an added threat to the outlook although economic conditions are still not the best.

In the bigger picture, I would argue that monetary policy divergence is still a key driver and with the Fed and RBA on two different sides of the spectrum somewhat, a return back towards 0.7800 to 0.8000 is likely out of the picture.

As such, fair value gains may point towards a push towards the 200-day moving average (blue line) at most on a technical break but it shouldn’t be much more than that.

Sellers will be looking to breach 1.2400 next and there isn’t much support beyond that as the downside momentum could extend back towards the region of 1.2200 to 1.2300.

The 61.8 retracement level of the swing move higher from May to August is seen at 1.2367 so one can perhaps point to that for some minor support in the meantime.

There are a lot of good things working in favour of the loonie lately but surging oil prices continue to be the most obvious catalyst. WTI is trading back up above $81 today, 0.8% higher, and that continues to keep the currency underpinned.

Meanwhile, the dollar is not looking too hot despite rising wage pressures from yesterday’s US CPI report so there’s that to consider when weighing sentiment this week.

I’d still argue that the loonie is still favoured for further gains at this stage and CAD/JPY is also another key pair to watch as it climbs to its highest since January 2018 and closes in on key resistance around 91.58-64 at the moment.

Erdogan has fired members of the Bank’s monetary policy committee before, including the Governor. Erdogan’s prescription for lowering the inflation rate is to cut interest rates. Which is directly opposite to (well reasoned) orthodoxy.

Turkey’s central bank has zero credibility on policy. TRY has been reflecting such for a good long while. Monthly candles of USD/TRY :

Every fresh seven-year high in USD/JPY prompts another wave of buying. This leg was strong enough to boost the dollar right across the board.

It comes with 10-year Treasury yields ticking higher to 1.608% but not yet to the Friday high of 1.62%. If that gives way, we could see another leg. Note though that there’s a 10-year auction today at 1 pm ET.

I would expect this move to transition into more of a ‘sell-the-yen’ trade across the board but equities might have ideas of their own.

Offers up 3 reasons, none of which should come as much surprise, but a useful quick summary nonetheless:

The latest shove in the past week sees price action push past the 100-day moving average (red line) and the August high @ 88.46. That has paved the way for further gains over the past few days with buyers edging past the 89.00 level today.

So, what’s next for the pair?

From a technical perspective, it is lining up for a solid rebound potentially back towards the late-May to early-June highs close to 91.00.

And with oil/commodity prices surging as well as a rather decent fundamental backdrop domestically, the loonie is keeping in good stead on the balance of things.

Adding to the tailwind for buyers in CAD/JPY is the surge higher in bond yields in recent weeks too. However, any further continuation of that will highly depend on today’s US jobs report for validation as we are seeing 10-year Treasury yields near 1.60%.

As such, if the fundamental factors align (especially the bond market), CAD/JPY is one to watch as it could perhaps look towards breaching the highs for the year.

It also isn’t the only yen pair that is looking for potentially more upside at this point.

Here’s a look at GBP/JPY and AUD/JPY, which are both contesting key technical resistance from its 100-day moving averages respectively at the moment:

China’s decision to boycott Australian coal isn’t looking too wise at the moment as prices jump to skyhigh levels and China is threatened with power outages.

The RBA meeting is at 2330 GMT today and it will be a tricky on as the pandemic begins to clear out the Australian political scene. Thankfully vaccination progress is continuing but there’s a huge reserve of people in the country who haven’t been infected, meaning the early success there could mean a long-term drag.

The mood in equity markets is stable markets with S&P 500 futures down 18 points. But FX is often a leading indicator and the dollar is under some pressure, despite 10-year yields rising 2 bps.

On equities, I would note that 62% of stocks in the S&P 500 are down 10% from their 52-week highs and 16% are down 20%. The internals aren’t quite as solid as the index.

AUD/USD is up 32 pips and is having a look above Friday’s highs. That’s the best level since Sept 27.