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18 Jun 2013
Flash: AUD/JPY selloff at exhaustion point – Westpac
FXstreet.com (New York) - We noted a couple of weeks ago that we felt borderline crazy when we told clients in the US a few weeks ago that 90.00 was possible in AUD/JPY - AUD/JPY was above 105.00 at the time.
According to Global FX Strategist Sean Callow at Westpac, “At the time, we argued "90.00 was achievable. Indeed it looked like it could be exceeded. Since then AUD/JPY has indeed hit and indeed overshot our objective.”
However, the speed of the decline looks like it is overdone here. The fall in AUD/JPY over the past 2 months now stands at just under 12%. Falls of 12-13% magnitude over a two-month period (or close to this level) typically represent an exhaustion point in terms of selling pressure in AUD/JPY. The clear exception was the episode in October 2008 when we saw close to a 40% drop in AUD/JPY over a 2-month period. This was obviously an exceptional period and excluding that episode, history suggests we aren't too far off a base in AUD/JPY in the context of the current sell off.
According to Global FX Strategist Sean Callow at Westpac, “At the time, we argued "90.00 was achievable. Indeed it looked like it could be exceeded. Since then AUD/JPY has indeed hit and indeed overshot our objective.”
However, the speed of the decline looks like it is overdone here. The fall in AUD/JPY over the past 2 months now stands at just under 12%. Falls of 12-13% magnitude over a two-month period (or close to this level) typically represent an exhaustion point in terms of selling pressure in AUD/JPY. The clear exception was the episode in October 2008 when we saw close to a 40% drop in AUD/JPY over a 2-month period. This was obviously an exceptional period and excluding that episode, history suggests we aren't too far off a base in AUD/JPY in the context of the current sell off.