- AUD/JPY bulls hold the fort in the 71 handle but fear a surprise rate cut.
- The Aussie would be set to spike hard to the downside on a rate cut.
AUD/JPY is trading within recent ranges and the series of the lower highs laves the bias bearish as we head into the Reserve Bank of Australia. The cross is currently trading at 71.30 in a tight 7-pip range.
Eyes on the RBA
First up, before the RBA, we have Aussie Retail Sales but they will take second place to the RBA and indeed Gross Domestic Produce later in the week.
"Q2 business indicators were mixed with the decline in inventories offsetting stronger than expected wages numbers, and solid headline profits. Non-mining profits were disappointing though, in contrast to the relatively solid 2019-20 capex plans. Together, these numbers make us feel comfortable with our forecast for a modest rise of 0.2% q/q in Q2 GDP, due on Wednesday," analysts at ANZ Bank explained.
While the RBA is expected to hold although there is still the possibility of a surprise considering the lingering concerns about economic growth amid rising trade tensions and should there be one, the Aussie would be set to spike hard to the downside and remain under pressure considering the escalations of trade wars, protests in Hong Kong, Chinese and global sluggish growth. Moreover, looking across the macroscope from which the Aussie is correlated to, weak economic data weighed on the base metals sector, with copper and aluminium prices falling.
"China manufacturing was weak, with the official PMI dropping to 49.5. Sub-gauges showed weakness in domestic and new overseas orders, suggesting China is struggling to mitigate the impact of the trade war," analysts at ANZ Bank noted.
AUD/JPY levels
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