The USD/JPY and AUD/JPY currency pairs saw significant gains on Monday as China’s announcement of a policy shift boosted risk sentiment across financial markets. The Politburo’s statement on adopting an “appropriately loose” monetary policy for 2025 marked a significant easing stance, the first of its kind since the global financial crisis, and fueled optimism for increased domestic consumption and demand.
China’s Market Reaction and Impact on FX
Chinese indices surged on the news, with Hang Seng futures climbing over 8% from Monday’s low and China A50 futures gaining more than 6% from last week’s low. This market rally stabilized the yuan, preventing USD/CNH from breaking above the 7.3 level. The improved sentiment allowed AUD/USD to bounce strongly from a key support level, with both AUD/USD and NZD/USD emerging as the strongest performers among major currencies during the session.
Meanwhile, the Japanese yen weakened, making it the day’s worst-performing major currency. This dynamic propelled AUD/JPY and USD/JPY higher, with analysts suggesting further bullish momentum in the short term before potential corrections.
AUD/JPY Technical Outlook
AUD/JPY is currently rebounding from recent lows, supported by a bullish engulfing pattern around a significant volume point of control (VPOC) on the weekly chart. Bulls may look to buy on dips within Monday’s range, targeting the 20-day EMA at 98.42 or the 50-day EMA at 99.21, with resistance near the breakout level of 99.44.
On the flip side, bearish traders might wait for signs of a swing high forming near these resistance levels, anticipating a potential move lower toward the August low. A break below this level could bring the 86 handle into focus, aligning with the 2021 high and 2023 low.
USD/JPY Technical Outlook
USD/JPY also rallied sharply, reaching a key pivot-point target of 151.3, with further upside potential toward 152 and possibly 153.28. Monday’s price action suggested strong bullish momentum, building on a higher low formed last Friday at a key support level near the August high.
Traders may watch for buying opportunities on dips within Monday’s range as prices continue to test critical resistance zones. A break above 152 could set the stage for a move toward the 153.28 level. However, bearish traders may monitor overbought conditions on the daily RSI (2) for signs of a reversal, with potential resistance at 152 or 153-153.28 offering areas to anticipate a downward move.
Economic Events in Focus
Key economic events this week include the Reserve Bank of Australia’s (RBA) interest rate decision, where no changes are expected, and upcoming data on Australian jobs and inflation, which could shape expectations for rate cuts in 2024. Japan’s GDP data, money supply figures, and trade balance updates from China are also on the radar.
Meanwhile, the broader market will keep an eye on pivotal levels for USD/JPY and AUD/JPY, as risk sentiment and technical factors continue to drive price action.
