Time for AUDJPY Longs?
The outlook for the RBA has now shifted and the RBA now meets the targets it has set for itself. The Bank of Japan has upgraded its inflation outlook, but this has not signalled a change in monetary policy. The last BoJ meeting was uneventful and the bank is not expected to change its ultra-low interest rate policy for the foreseeable future. It, like most central banks, sees wages as the key driver for inflation they need to watch. In its summary of opinions, it states that wages are less likely to rise in Japan than they are in the US and Europe. See its summary of opinions here.
The BoJ needs a change in the board to change policy
According to CACIB investment, the most likely juncture for any serious change to the BoJ’s monetary policy will be in 2023. This is the time when the Board has a large turnover in personnel including the expiry of Governor Kuroda’s term of office.
If this diversion remains in place with the RBA set to move higher on rates, but the BoJ is remaining on hold then AUDJPY longs would make sense. The recent risk-off trading brought on by fears of Russia making an incursion into Ukraine has brought the pair lower. Remember that the JPY is the go-to risk-off trading currency. When risk is hit, the JPY gains. See the AUDJPY below for key technical areas for stops and targets.