Aussie dollar sits quietly at .7500 while all eyes on Japan stimulus

“With the spotlight on USD/JPY, Aussie traders should be quiet in early trade,” said Stephen Innes, senior currency trader at FX and CFD firm OANDA Australia and Asia Pacific.

However, Innes noted that the Australian dollar continues to find support. 

“First, this week's CPI has influenced traders short term positioning as an expected Reserve Bank of Australia’s (RBA) rate cut is not  a guarantee with FX market current odds running 50:50,” said Innes.

According to Innes, “The market decided the Federal Open Market Committee (FOMC) upgraded assessment of the US economy was not strong enough to alter the current the Federal Reserve narrative, at least for this week,”

He added that, “The Aussie bears were more inclined to pare back shorts amidst broader US dollar weakness,”

On the other hand, Innes pointed out that adding to the momentum was month end flows that were signalling a US dollar selling bias.

“For today the biggest question mark will be the post BOJ markets reaction to broader risk and how that plays out,” said Innes. 

However, Innes noted that the Aussie dollar should be at the mercy of shifting risk sentiment given the currencies unyielding correlation with investor risk appetite. 

“This could be a little more delicate as the fall out the impact of a rate cut is less clear on how it will affect the financial sector if the Bank of Japan (BOJ) moves into the deeper negative territory,” said Innes. 

“The growing consensus is to buy Australian dollar on Central Bank easing rather than to position for RBA rate cut. I think risk appetite will dominate today's session,” he said. 

Innes added, “With the massive global economic calendar ahead of us today, there will be no shortage of inputs."

********

For more information, visit: https://www.oanda.com/