• The AUD/JPY has fallen during the trading session on Thursday, dropping down to roughly ¥88.50 at the Lowell, before bouncing a bit.
• The market has a short-term trendline in that area, and if we were to break down below there, then I think we could get momentum in this pair.
• In fact, I think the Japanese yen must be watched very closely because, on most pairs, it’s likely that we would see everything move in the same direction.
• After all, the AUD/JPY pair breaking down below the ¥127 level will probably send the yen spiking against almost everything.

The Bank of Japan continues to fight interest rates rising in the 10-year note, with a goal of keeping it below the 50-basis point level. If we stay below there, then you must know that the Bank of Japan is fighting those bonds giving up more gain by buying “unlimited bonds”, which in theory should drive down the value of the Japanese yen as they will have to print unlimited again to do so. On the other hand, if the interest rates around the world drop, meaning that they probably would drop in Japan as well, then it’s less pressure on the Japanese yen, and is likely that we could continue to go lower.
 

We Could Get a Significant Breakdown

The nasty candlestick from the Wednesday session was due to the market getting news that the Bank of Japan was going to allow this yield curve control to continue, so the natural reaction was that the Japanese yen should fall. However, it looks as if the markets are now trying to call the bluff of Tokyo, as they completely reverse the situation.

 It looks as if we could get a significant breakdown, and if we slice through this uptrend line, I will generally believe that the market could go down to the ¥83 level, which is the next major cluster I see underneath. On the other hand, on rallies, I think the ¥92 level is a major barrier to overcome, and at this point, if we were to break above there, then it’s possible that we could go investigate the ¥95 level after that. Ultimately, I’m waiting to see if we get some type of breakout that I can take advantage of.

(Click on image to enlarge)

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