AUD/JPY Signals
About the AUD/JPY (Australian dollar & Japanese Yen)
The AUD/JPY pair is the abbreviated term used for the Australian dollar and Japanese Yen, nicknamed as "Aussie Yen". Before we get into the particulars, what exactly does AUD/JPY rate mean? The exchange rate tells you how many Canadian dollars (quote currency) are required to purchase one Australian dollar (base currency). For example, if the pair is trading at 0.95, it means it takes 0.95 Canadian Dollars to buy 1 Australian Dollar.
Breaking Down ‘AUD/JPY’
The Australian dollar is known as a commodity currency due to the role of Australia in global gold production and export. Aussie exhibits a long-term positive correlation with the value of gold.
Whereas, the Canadian dollar is also classified as a commodity currency, and it exhibits a correlation to the energy products crude oil and natural gas. Since the Australian dollar is a first currency (base currency) and the Canadian dollar is a second currency (quote currency), the pair is called a cross currency pair.
Currency Correlations
Correlation is merely a mutual relationship or connection between two or more things.
Positive correlation – The positive relationship merely is when pairs move in tandem with each other.
In the forex world, the AUD/USD and AUD/CHF currency pairs are positively correlated. It's because all these pairs have an Australian dollar in the numerator. So, any change in the Aussie will be reflected in these pairs.
Negative correlation – In contrast, a negative relationship is when forex pairs move in the opposite direction. For example, CAD/CHF and CAD/JPY pairs share a negative correlation. It's because the Canadian dollar is the base currency and is in the numerator.
Gold & Aussie: One essential characteristic of the AUD is that it has a high positive correlation with gold prices. The reason behind this is that Australia is the third biggest gold producer in the world. As a result, whenever the price of gold rises or falls, the Aussie goes along for the ride. This will ultimately move the AUD/JPY pair in the same direction.
Crude Oil & Loonie: Typically, the price of crude oil has been highly correlated with the Loonie. Therefore, a rise in crude oil prices increases the value of the Canadian dollar and vice versa. The AUD/JPY shares a negative correlation with crude oil prices.
What Determines the AUD/JPY Exchange Rate?
Several factors can impact the AUD/JPY rate valuation, including:RBA & BOC Monetary Policies: The Reserve Bank of Australia and the Bank of Canada control the supply of money in the market, to keep the economy on track. A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency.
Economic Events: The movement in the Canadian and Australian economic events determine the exchange rates. Top of the line economic events include GDP, Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Australian Dollar or the Canadian Dollar, causing fluctuations in the AUD/JPY exchange rate.
Major Economic Events:
Gross Domestic Product – the Gross domestic product is the central measure of economic growth in the region.
Employment Change – Both of the currencies are sensitive to changes in employment, as slacks in the labor market cause a drop in Inflation rates.
Consumer Price Index – Since one of the goals of the RBA and RBNZ is to maintain price stability, they keep an eye on inflation indicators such as the CPI. If the annual CPI deviates from the central bank’s target, the RBA could make use of its monetary policy tools to keep inflation in check.
The balance of Trade – Australia and Canada have an extremely robust trade sector, so currency traders and bank officials alike tend to watch changes in the country’s export and import levels.
Political announcements & natural disasters – Besides the scheduled economic events, the political elections, new systems, wars, terrorist incidents, and natural calamities, etc. can all cause severe variations within the AUD/JPY.
Assets and Currencies Influencing Price Action of AUD/JPY
Currencies
- Any factor affecting the price of the Chinese Yuan will impact AUD/JPY
- EUR/USD
- GBP/USD
- USD/JPY
- NZD/USD
- USD/CAD
Commodities
- Oil prices
- Precious metals
- Agriculture
AUD/JPY Price Factors - People, Economic Data, Organizations and People
- Bank of Japan - The official central bank of Japan tasked with issuing financial statements and determining interest rates. The bank has got attention worldwide for its low interest rates. For example in 2016, BOJ introduced a negative interest to offset rising consumer prices. Watch out for key announcements in interest rates changes, and the Bank’s involvement with the bond market.
- Japans government, Key officials like the Prime Minister Fumio Kishida, The Japan Financial Services Authority.
- United States Government - Australia and U.S have tying economic relations and any economic events in both countries will affect the direction of the Aussie Dollar.
- Reserve Bank of Australia - Australia’s central bank issues statements and determines interest rates.
- Australia’s Government, and the Department of Finance - any decisions and key policies implemented by these institutions will affect the direction of the AUD currency.
- Japan Statistics Bureau - Traders need to track major statistic releases from the Japan Statistics Bureau. Focus on the following, GDP Figures, Trade Balance Numbers and the Consumer Price Index.
- Japan Meteorological Agency - Japan has faced various natural disasters throughout history. Paying attention to any news from the Japan Meteorological Agency will prepare you for any prudent chances in price patterns due to warnings of Earthquakes.
AUD/JPY Specifications
The AUD/JPY is traded in amounts denominated in the US Dollar.
Standard lot Size: 100,000
Mini lot size: 10,000
One pip in decimals 0.0001
Pip Value: $7.49
Formula
Pip Value = Tick Size x Trade Size x Base Quote/Current Rate
AUD/JPY - FAQs
AUD/JPY is a popular currency pair for trading, however, it is not necessarily the best one for everyone. The AUD/JPY currency pair has been known to be volatile and thus may be suited for more experienced traders who are able to capitalize on quick price fluctuations. This currency pair may also suit those who prefer trading in higher volatility markets as well as long-term investors who believe that there will be an increase in the value of the Australian dollar against the Japanese yen over time. As with any type of trading, it is important to thoroughly research all factors before engaging in AUD/JPY pairing and ensure that you have a solid understanding of how market forces affect this particular pairing.
At the current moment, AUD/JPY is showing a bullish trend due to strong demand for the Australian Dollar relative to the Japanese Yen. The pair has been rising steadily since March 2021 and is expected to continue this trend in the near future. There could be some short-term corrections along the way, but overall AUD/JPY should see an upwards movement.
The AUD/JPY exchange rate is constantly fluctuating due to changes in the value of both currencies relative to each other. The Australian dollar has been gaining strength against the Japanese yen and currently stands at around 78.44 JPY per 1 AUD. This rate remains significantly higher than what it was in 2016 when 1 AUD was only worth 68.78 JPY, meaning that if one were to buy 100 JPY with AUD then they would now receive more JPY compared to what they would have four years ago.
1. Interest Rate Differentials: The difference in interest rates between the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ) affects their respective currencies. If one central bank raises interest rates while another keeps them steady, investors may buy more of the currency offering higher returns, leading to an appreciation.
2. Risk Appetite: Risk appetite can also influence AUD/JPY exchange rate fluctuations as it directly influences how much investors are willing to purchase riskier assets such as commodities or stocks that are denominated in Australian Dollars(AUD). When the global economy remains uncertain, traders tend to shift from riskier assets into safe haven currencies like the Japanese Yen (JPY), resulting in a strengthening JPY against AUD.
3. Monetary Tweaks by Central Banks: Central banks often tweak liquidity flows for varying reasons—inflation control is one—which directly impacts the volatility of exchange rates like those for AUD/JPY pair. For example, if RBA decides on a quantitative easing policy to stimulate the economy by pumping cash into circulation then it could lead to a depreciation in the value of the AUD/JPY pair due to increased supply and reduced demand for AUD versus JPY.
4. Foreign Exchange Reserves: If we look at current foreign exchange reserves held by the Reserve Bank of Australia- they make up a very small portion compared with Japan's holdings –it will give us an indication that there is a lower demand for AU$ than JP¥ among global players, making this currency pair volatile sometimes depending on how political events unfold around respective countries’ economies.
5. Global Events & Economic Conditions: Global economic conditions play a key role when factors like employment levels and investment sentiment vary from country to country or regionally; triggering significant movements with this highly traded currency pair such as that experienced after the Brexit referendum or US presidential elections results were released indicating positive trends towards newly elected President Donald Trump’s policy announcements concerning his.
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