This is a follow up to our AUD/JPY short trade, entered at 80.25, stop at break even 80.25. Last updated in our weekly report.
AUD/JPY rebound strongly today on news that the US is trying to restart trade talk with China. And Trump intends to postpone the announcement of 25% tariffs on USD 200B in Chinese goods after that. Public hearing on the tariffs ended last week.
While the rebound is strong, our strategy is… don’t panic. Firstly, at the time of writing, both he Treasury Department and Commerce Department declined to comment. So, it could be another piece of “fake news”. Secondly, at the time of writing too, there is no follow through buying above 4 hour 55 EMA yet.
Technically, 4 hour technical doesn’t look very promising, with bullish convergence condition in 4 hour MACD. But there is no confirmed reversal yet. Hence, we’d hold on to the short position, with stop unchanged at 80.25 (break even). But the chance for us to exit slightly above 61.8% projection of 90.29 to 80.48 from 83.92 at 77.85 has increased. We’ll still not rigid exit there yet, as we’d like to give the cross a little breathing room on the news (real or fake).
And, after all, it’s trading. Sometimes you win, sometimes you lose. Even if we’re stopped out, it’s not a loss!
Contrasting comments from Fed Brainard and Bullard
There are some contrasting comments from Fed officials today.
Fed Governor Lael Brainard said that “with fiscal stimulus in the pipeline and financial conditions supportive of growth, the shorter-run neutral interest rate is likely to move up somewhat further, and it may well surpass the longer-run equilibrium rate for some period.” And to her, gradual interest rate hikes are likely to be appropriate.
On the other hand, St. Louis Fed President James Bullard emphasized that “you can’t just say, ‘unemployment is 3.9 percent, obviously we have to raise rates’; or, ‘growth is fast, obviously we have to raise rates.'” He noted that “I don’t think that feedback to inflation is very strong to be able to make that argument.”