First and foremost, let's touch up on the FED's interest rate decision. It was disappointing for the traders who expected the benefit from the USD price movement. President Donald Trump was not happy with the FED’s decision and tweeted: “Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”
In line with the forecasts, the FED lowered the interest rate by a quarter 0.25bp. The interest rate is now at 2%. Two members of the FOMC, Esther L. George and Eric S. Rosengren, were against the cut, while everyone else voted for the easing, and James Bullard wanted an even bigger rate cut.
Fed Chair Jerome Powell failed to give any further hints at further Committee’s action, which is understandable considering that the world economy is on a volatile rollercoaster without brakes.
As a result, there was minimum movement of the USD majors.
Today we are going to analyze the AUD/JPY pair. The Australian Bureau of Statistics released their data on Employment at 1:30 GMT.
The general picture worsened, because although the Employment Change rose by 34.7K, the number of full-time positions decreased by 15.5K. Therefore, the gain is due to part-time position employment.
With less full-time jobs, consumers are likely to spend less, which will put the RBA under pressure to lower its monetary policy. The RBA’s meeting minutes were released on September 17, following the decision to leave the interest rate unchanged at 1% on September 3rd, after 2 consecutive quarter rate cuts in June and July.
The concluding statement of the RBA is as follows: “Based on the information available, members judged that it was reasonable to expect that an extended period of low interest rates would be required in Australia to make sustained progress towards full employment and achieve more assured progress towards the inflation target. Members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”
Very dovish indeed. The next interest rate decision is set for October 1.
Following Australia’s employment data, Japans released its interest rate decision at 03:00 GMT. Japan kept the interest rate unchanged at -0.10% but the door is still open to further easing. According to the monetary policy statement, “Given that, recently, slowdowns in overseas economies have continued to be observed and their downside risks seem to be increasing, the Bank judges that it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost. Taking this situation into account, the Bank will reexamine economic and price developments at the next MPM, when it updates the outlook for economic activity and prices.” The next date for monetary policy meeting in Japan is not known yet. The JPY was trading slightly bullish at the time when BoJ released its interest rate.
Looking at the pair on a 4HTF, we see a rally that started in early September due to renewed trade talks between the United States and China.
China is Australia’s largest two-way partner: export market and import source. China currently imports approximately 30% of Australian export, which is rich in commodities, such as iron ore, coal, petroleum gasses and gold to name a few.
The pair found resistance around 74.5 and started trading in a range. Today, the release of weaker data on AUD employment and stable BoJ pushed the price down. The price did not go far, and we have a slight retracement from the 38.2% Fibo. We do have the TK death cross and Lagging Span intersecting with the price chart, but all averages are pointing sideways and there is a kind of a flat.
Technically, targets down are going to be 72.795 at the 50% Fibo and 61.8% Fibo, which also coincides with a strong area of resistance, which turns into support at 72.394. We have to follow new political releases and not rule out the possibility that AUD/JPY can grow, and close Monday gap around 74.303.