AUD/JPY: consolidates recent risk-off environment with a bearish bias

Currently, AUD/JPY is trading at 83.72, down -0.73% on the day, having posted a daily high at 84.43 and low at 83.23.

Risk-off markets favored the yen this week. The Aussie is in no-man's-land still, stuck around the 0.76 handle and the cross consolidates in a subdued US session. The highlights so far this week have been a drop in equities/US yields forcing USD/JPY below the 200-d EMA at 111.24. USD/JPY went on to make a low of 110.26 and shy of the 26th March low of 111.10. 

Australia's Feb trade balance sees major beat on expectations

In respect of the Aussie, bulls may be baffled as to why the record trade surplus did little to support demand given how much Australia relies on its trading relations with an improving Chinese economy. The trade surplus rose to AUD 3.547 billion in February, which was reported overnight. This was well above the consensus estimate of AUD 1.800 billion. Exports rose 1.5%.

However, as explained by analysts at TD Securities, "1) a sharp drop in consumption imports explained the larger than expected surplus and 2) the RBA refrained from voicing a hawkish bias following last week’s macro prudential announcements." The RBA kept the cash rate unchanged at 1.5% as was universally expected. "but it is evident for now that the RBA is in ‘wait and see’ mode to assess the impact of the latest macro prudential measures," explained the analysts at TD Securities.

AUD/JPY levels

While trading below the weekly 200 EMA at 86.44 and having broken the 200-d EMA at 83.83, the cross is in bearish territory targeting 82.60 first as the late Nov 2016 resistance ahead of 81.50. To the upside, the 85 handle has the 85.70 30th March highs before 85.80 late Feb lows with 87.50 on the wide representing the March highs.