Forex Market: AUD/JPY trading forecast for October 19th

Friday’s trade saw AUD/JPY within the range of 86.29-87.39. The pair closed at 86.73, losing 0.45% on a daily basis, while marking its first drop in the past three trading days. In weekly terms, AUD/JPY lost 1.70%, following a 4.41% advance during the week ended on October 11th. It has been the sharpest weekly decline since the week ended on September 27th, when the pair went down 1.83%.

No relevant macroeconomic reports and other events, which may influence AUD/JPY trading, are scheduled on Monday (October 19th).

Correlation with Major Pairs

Taking into account the week ended on October 18th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

AUD/JPY to AUD/USD (0.8361, or very strong)
AUD/JPY to USD/CHF (0.7069, or strong)
AUD/JPY to USD/JPY (0.5734, or strong)
AUD/JPY to USD/CAD (0.2269, or weak)
AUD/JPY to NZD/USD (-0.1659, or weak)
AUD/JPY to GBP/USD (-0.1968, or weak)
AUD/JPY to EUR/USD (-0.3629, or moderate)

1. During the examined period AUD/JPY moved almost equally in one and the same direction with AUD/USD, while moving strongly in one and the same direction with USD/CHF and USD/JPY.

2. The correlation between AUD/JPY and USD/CAD, AUD/JPY and NZD/USD, AUD/JPY and GBP/USD was insignificant during the week.

3. AUD/JPY moved to a moderate extent in the opposite direction compared to EUR/USD during the period in question.

Bond Yield Spread

The yield on Australias 2-year government bonds went as high as 1.833% on October 16th, after which it slid to 1.819% at the close to lose 1.3 basis points (0.013 percentage point) compared to October 15th. It has been the fourth drop in the past five trading days.

The yield on Japans 2-year government bonds climbed as high as 0.014% on October 16th, or matching the high from the past five trading days, after which it fell to 0.011% at the close to gain 0.002 percentage point compared to October 15th.

The spread between 2-year Australian and 2-year Japanese bond yields, which reflects the flow of funds in a short term, shrank to 1.808% on October 16th from 1.823% during the prior day. The October 16th yield spread has been the lowest one since October 14th, when the difference was 1.802%.

Meanwhile, the yield on Australia’s 10-year government bonds soared as high as 2.639% on October 16th, after which it slid to 2.628% at the close to lose 0.009 percentage point compared to October 15th. It has been the fourth drop in the past five trading days.

The yield on Japan’s 10-year government bonds climbed as high as 0.327% on October 16th, or the highest level since October 9th (0.339%), after which it slipped to 0.320% at the close to add 0.009 percentage point compared to October 15th.

The spread between 10-year Australian and 10-year Japanese bond yields narrowed to 2.308% on October 16th from 2.328% during the prior day. The October 16th yield difference has been the lowest one since October 14th, when the spread was 2.244%.

Daily and Weekly Pivot Levels

By employing the traditional calculation method, the Monday pivot levels for AUD/JPY are presented as follows:

Central Pivot Point – 86.80
R1 – 87.32
R2 – 87.90
R3 – 88.42

S1 – 86.42
S2 – 85.70
S3 – 85.12

By using the traditional method of calculation again, the weekly pivot levels for AUD/JPY are presented as follows:

Central Pivot Point – 87.16
R1 – 88.26
R2 – 89.80
R3 – 90.90

S1 – 85.62
S2 – 84.52
S3 – 82.98