AUDJPY AUD/JPY

US holidays, with an early close of equity markets, briefly shifted the focus into currency trading. The Yen-related pairs topped the charts, following the Bank of Japan's gradual retreat from low interest rate policy. Japanese central bankers' retreat from several decades of their ultra-simulative stance is clearly at odds with the start of cutting borrowing costs in almost every other part of the world. Lower rates in Dollars, Euros, British pounds etc are eagerly awaited, while the Bank of Japan is signalling to raise its short-term rates from the current 0.25% after lifting its previous bond yield cap and tapering its bond purchase program. As a result, USDJPY got a negative slope and even ducked under the major psychological support line at 150 in the early morning hours of Friday. I think it could fall down faster, but the country's new PM Shigeru Ishiba wants to spend nearly 14 trillion yen, an equivalent of more than $90 billion, for a package of special measures to balance the social damage from rising living costs. It is going to be funded by a supplementary budget legislation to be launched just before the end of this week. This would create more public debt pressure for Japan's financial system. The debt is now exceeding 1,100 trillion yen, being the biggest percentage burden among advanced nations compared to the size of its economy, and the further moves on exit from zero rates increases the cost of serving this stratospheric debt. Japan will spend approximately 27 trillion yen, or nearly 25% of its annual budget, on debt-servicing costs.

Such considerations are constraining the pace of national currency's strengthening, yet it is going on with varying success in all Yen-related pairs like EURJPY, GBPJPY as well. However, AUDJPY is probably the crowd's next favourite in short positioning, as the pair just had its previous support levels around 100 freshly broken only a couple of days before, with a huge space for further sliding below. The Reserve Bank of Australia is later than other regulators in launching its own version of a rate easing cycle. It is going to start the dovish steps only in May 2025, according to the bank officials' hints and many analysts, citing a resilient employment curve and rather steady business conditions. Markets would probably see only two or three 0.25% reductions during the next 12 months in Australia. The cash rate is at 4.35%, after additional raising above 4% in June 2023, yet softer-than-expected consumer price indications in the recent month and some softening in the labour market may form the ultimate driver for the Reserve Bank of Australia to open the door to an early 2025 easing.

As spring may come early or late, but it is going to come in several months anyway, so that interest rate cutting would touch the Australian Dollars' value some sooner or later as well. Rate cutting is an overall trend in the whole community of developed economies, which are all interconnected and extremely interdependent, and so I think the market sentiment of buying the Japanese Yen against other reserve currencies will push AUDJPY to go down, targeting at a 93-95 range for the beginning. Again, all pairs containing Japanese Yen are usually very well synchronized. My basic scenario for the next week already is further accelerating their move down, led by the growing inertia momentum technically, while keeping in mind lower goals fundamentally. Looks like a good opportunity for short-term bets.