This marks a fourth consecutive day of gains, during which AUD/JPY rallied more than 4.0%.
The RSI indicates that the pair is overbought.
AUD/JPY’s dramatic rise was not slowing down on the last trading day of the week. The pair surged another 1.0% to reach its highest level since January 2018, at 88.30. This marks the fourth consecutive day of gains. The pair has rallied more that 4.0% since it was below 85.00. It easily surpassed 2021 highs at the low 86.00s.
Global equities rallied on Friday as usual, as was the case since Tuesday. This lifted risk-sensitive crosses like AUD/JPY. Other important factors are working in favor of the bull AUD/JPY. Friday’s BoJ released its latest monetary policy decision. The bank remained as expected to its ultradovish stance and maintained its position as the most dovish central bank in the G10 alongside the SB.
The yen was affected by the BoJ’s dovish attitude in a week that saw a lot of attention on central banks. Both the Fed and BoE decided on rates, both raising them 25bps. Separately, AUD continues its strong performance, along with other commodity-sensitive G10 currencies, as investors and traders reposition themselves to favor currencies that will benefit from recent geopolitical induced rallies of commodity prices.
While most energy and other Russia-sensitive commodities prices trade above pro-Russian invasion of Ukraine levels, some (like crude oil), have pulled back from the highs last week and stabilized at slightly lower levels. AUD’s performance this week confused some analysts. However, others pointed out that Australia (and New Zealand) stands to benefit from higher commodity prices. They also stand to benefit from major commodity buyers turning away from Russia to find supply from other major resource-producing countries.
Some technicians may be worried that the rally is now too stretched. Indeed, the AUD/JPY 14-Day Relative Strength Index has hit 78 on Friday. This is well above the level that most people consider to be in over-bought territory. It also marks its highest point since October last year. The bulls will look for support at 86.00 to reload their longs and make a more sustained pullback if they are successful.
