The Australian dollar is under pressure both paired with the US currency, and in major cross-pairs. The fundamental picture and technical analysis say about the priority of short positions, especially in the short term. Despite the general weakening of the Australian dollar, in each case there are reasons for the downward movement, which must be taken into account when opening trading positions.
The favorite of today is the Japanese yen. The unexpected decision of the Bank of Japan to reduce the volume of purchases of long-term government bonds, to put it mildly, surprised the market. After all, at the last meeting, the regulator did not say a word about the forthcoming changes. As at all previous meetings, the central bank assured the market that it will adhere to a soft monetary policy for a "long time". And in the autumn, Haruhiko Kuroda even set an indicative horizon: according to him, the target inflation rate will be reached "only in years", so it's too early to talk about any changes.
However, the Bank of Japan once again confirmed its reputation in the context of unexpected decisions. Two years ago - on January 29, 2016 - the Japanese regulator introduced a negative rate on new deposits. Although a week earlier, Kuroda urged lawmakers that the central bank "does not even seriously consider such a scenario." It is worth noting that not all board members agreed to this proposal: the decision was made with a minimum margin (five managers versus four). According to rumors, a few days before the meeting, Kuroda urged his colleagues to vote for the introduction of a negative rate. After the announcement of the sensational decision, one of the currency strategists of Capital Economics stated that Kuroda "deserved notoriety of changing the monetary rate when the market least expects it."
Today's decision was not so drastic. At the same time, the actions of the Japanese regulator forced the market to discuss the possibility of further tightening of monetary policy. It became clear that it is pointless to rely on the statement of the officials of the central bank, since the regulator in this regard is not as compulsory as, for example, the Fed or the Bank of Canada. Therefore, traders have to start from the facts. And the facts show that the Japanese regulator decided to purchase long-term state bonds (from 10 to 25 years) for 190 billion yen, that is, reducing this amount by 10 billion yen. In addition, the central bank reduced the same amount of purchases of long-term government bonds (25-40 years). At the moment it is unclear whether these rules will apply to the next purchase or this one-time event. There are no any detailed comments from the Bank of Japan.
Nevertheless, the currency strategists of many large banks have already managed to assume that today's step is the first on the way to winding down the bond buying program. And this, in turn, indicates that the Japanese have joined the general trend of gradual tightening of monetary policy conditions.
The Australian currency can not "boast" of such an achievement, as the head of the RBA Philip Lowe has firmly taken a wait-and-see attitude, and the central bank he led has never once made unexpected and sudden decisions that would contradict the present rate.
In general, the Australian dollar is declining for a variety of indirect causes. First, the Australian Department of Industry published a negative outlook for the cost of iron ore and copper. Secondly, the indicator of the number of building permits in annual terms showed a decline (although on a monthly basis it increased significantly), and thirdly - the index of the number of vacancies from ANZ fell (a minor, outstripping indicator of the labor market). All these fundamental factors play an insignificant role, but against the backdrop of the empty economic calendar, they determined the dynamics of the national currency.
The Australian dollar is also weakened paired with the US currency. However, the decline in the AUDUSD pair is uncertain - both from the technical point of view and from the point of view of the foundation. On the daily chart, the pair continues to be in the uplink, and the main indicators indicate the priority of the northern movement. If Friday's US inflation data is worse than the forecast, the growth of AUDUSD will resume.
But in the cross-pairs AUDJPY and (especially) AUDCAD the situation looks more reliable. The advantage of the Japanese currency is, although temporary, but quite eloquent. The Canadian currency paired with the Australian also clearly dominates. The growth of key indicators of the Canadian economy indicates that the central bank will continue the policy of tightening monetary policy. Moreover, the probability of an increase in the rate at the next meeting (January 17) rose to 90%. The continued rise in oil prices only adds to the attractiveness of the Canadian dollar.
Technically, the situation for the AUDCAD pair is as follows. The pair is trading in a downward direction, which is confirmed by the main trend indicators. So, on the four-hour chart Ichimoku indicator Kinko Hyo formed its strongest bearish signal "Line Parade", in which all lines of the indicator are above the price chart. In addition, the pair trades between the middle and bottom lines of the Bollinger Bands indicator, which shows an extended channel. And the MACD and Stochastic oscillators are in the oversold area. The daily chart also confirms a downward movement.
Thus, the nearest target of the downward direction is the 0.9698 mark - the lower line of the Bollinger Bands indicator on D1. A resistance level stands at 0.9760 - the upper limit of the cloud Kumo on the daily chart.
