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FxWirePro: RV options trades to tackle interim bullish consolidation and major downtrend of AUD/JPY

Australia’s strong trade surpluses reinforce the positive story from the commodity price up trend since July, lifting some of the US-China trade war risk premium. Upbeat RBA outlook also helps; scope for a test of 83.067 levels in the near-term. As we could foresee yen’s strength in the medium-run, we advocate staying shorts in AUDJPY cash trades.


Nevertheless, it gave a kicker to AUDJPY, which was also hit by the further increases in Australian bank lending rates and what at times felt like proxy selling for further EM stress. 

As discussed in the introduction we believe AUD is vulnerable from an extension of the move in EM currencies and the slow bleed from US monetary policy (average earnings in this sense were a worrying development for high-beta FX), even if the bar for the market to price RBA rate cuts is high and a lot higher than in NZ seeing how the economy managed to grow 4% in 1H. 

Option Trades Tips: 

Long a 3m AUDJPY put, strike 78.50, short a 3m AUDJPY 81.25-83.50 call spread.

Short AUDJPY in cash at 82.368 levels, stop 82.067.

Currency Strength Index: FxWirePro's hourly AUD is inching at 54 (which is bullish), JPY spot index is flashing at 64 levels (which is bullish), while articulating (at 10:00 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex

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December 17 07:00 UTC Released

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Bln AR bln ARS

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