LOOK AHEAD: UK Timeline of Key Events (Times BST)

• RES 4: 163.36 2.00 proj of the May 3 - 14 - 16 price swing
• RES 3: 163.00 2.0% 10-dma envelope
• RES 2: 162.21 1.764 proj of the May 3 - 14 - 16 price swing
• RES 1: 161.82 Intraday high
• PRICE: 161.83 @ 06:21 BST Jul 3
• SUP 1: 160.26/159.07 Low Jun 28 / 20-day EMA
• SUP 2: 157.35 Trendline support drawn from Dec 28 low
• SUP 3: 157.03 /154.55 50-day EMA / Low Jun 4
• SUP 4: 153.60 Low May 16

The trend in USDJPY remains bullish and the pair continues to appreciate. Last week’s breach of key resistance at 160.17, the Apr 29 high, confirmed a resumption of the primary uptrend and the bullish follow through since, reinforces current conditions. Note that moving average studies are in a bull mode position, highlighting positive market sentiment. Sights are on 162.21, a Fibonacci projection. Support is at the 20-day EMA, at 159.07.

AUD/JPY sits around session highs, last near 108.00. This is fresh highs in the pair back to 1991, see the first chart below. Late March 1991 levels got close to 109.55 in terms of upside levels to watch/potential targets for the market.

• The broader fundamentals still appear supportive for further gains in this cross. Recent data outcomes have heightened RBA tightening expectations, although the deciding factor is likely to be Q2 CPI, which prints at the end of July.
• For Japan, the BoJ is expected to follow a gradual path to tightening, although we should know more next week as the BoJ meets with key stakeholders in terms of its plans around tapering its bond buying plans.
• The supportive global equity backdrop is another factor, with the two series generally moving higher in tandem over recent months, see the second chart below. The same can be said for relative commodity prices, which remain firmly in the AUD's favor.
• The RSI (14) sits at 78.4, which points to overbought conditions from a technical standpoint. This is a risk in terms of the recent rally, which could be exacerbated if we see a fresh round of FX intervention by the Japanese authorities in terms of a downside correction in the pair.
• Such a scenario, if it unfolds, is likely to be deemed corrective though from a fundamental standpoint. The 20-day EMA sits back near 106.00. Dips sub this level were supported in early June.

Fig 1: AUD/JPY To Fresh Highs Back To 1991

Source: MNI - Market News/Bloomberg

Fig 2: AUD/JPY & Global Equity Trends

Source: MNI - Market News/Bloomberg