AUD/JPY correlation with S&P 500 unravels
AUD/JPY traded at its lowest level since March 2022 as it slipped to a fresh yearly low (86.06) last week, while the S&P 500 index advances for the third consecutive day to indicate an improvement in risk sentiment.
The positive relationship between AUD/JPY and the S&P 500 appears to be unraveling as the correlation coefficient currently sits at +0.39 from a more significant reading of +0.80 seen earlier this month. The weakness in AUD/JPY suggests a major shift in carry-trade interest as major central banks appear to nearing the end of their hiking-cycle.
AUD/JPY Rate Outlook
AUD/JPY cleared the December 2022 low (87.03) as it carved a series of lower highs and lows, but the exchange rate seems to be finding support ahead of 85.80 (61.8% Fibonacci extension) as it no longer reflects the bearish price action.
The move above the 87.20 (50% Fibonacci extension) to 87.40 (61.8% Fibonacci retracement) region may push AUD/JPY back towards 88.60 (38.2% Fibonacci extension), with a move above 89.60 (50% Fibonacci retracement) bringing 90.30 (23.6% Fibonacci extension) back on the radar.
However, failure to hold above 87.20 (50% Fibonacci extension) to 87.40 (61.8% Fibonacci retracement) region may spur another run at 85.80 (61.8% Fibonacci extension), with the next area of interest coming in around 83.80 (78.6% Fibonacci extension) to 84.30 (78.6% Fibonacci retracement).
--- Written by David Song, Strategist
Follow me on Twitter at DavidJSong
The positive relationship between AUD/JPY and the S&P 500 appears to be unraveling as the correlation coefficient currently sits at +0.39 from a more significant reading of +0.80 seen earlier this month. The weakness in AUD/JPY suggests a major shift in carry-trade interest as major central banks appear to nearing the end of their hiking-cycle.
AUD/JPY Rate Outlook
AUD/JPY cleared the December 2022 low (87.03) as it carved a series of lower highs and lows, but the exchange rate seems to be finding support ahead of 85.80 (61.8% Fibonacci extension) as it no longer reflects the bearish price action.
The move above the 87.20 (50% Fibonacci extension) to 87.40 (61.8% Fibonacci retracement) region may push AUD/JPY back towards 88.60 (38.2% Fibonacci extension), with a move above 89.60 (50% Fibonacci retracement) bringing 90.30 (23.6% Fibonacci extension) back on the radar.
However, failure to hold above 87.20 (50% Fibonacci extension) to 87.40 (61.8% Fibonacci retracement) region may spur another run at 85.80 (61.8% Fibonacci extension), with the next area of interest coming in around 83.80 (78.6% Fibonacci extension) to 84.30 (78.6% Fibonacci retracement).
--- Written by David Song, Strategist
Follow me on Twitter at DavidJSong
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