Keep This On Your Radar Over The Next Few Weeks - $AUDJPY
Monday, December 1, 2014
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During the most volatile periods of the financial crisis, risk on, risk off (RoRo) became a household name on trading floors around the world. RoRo refers to a situation in which investors either chase risky assets like stocks and currencies with high interest rates (risk on), or chase safer assets like treasury bonds and safe-haven currencies (risk off).
For a while now, AUDJPY has been the one of the most reliable RoRo meters around. There are several reasons why this is the case, so let’s begin by breaking up the currency pair to its components.
AUD, or the Australian dollar, is a perfect candidate for a risk on-currency as the country is a commodity producer, making it very vulnerable to shocks to the global economy. At the same time, it is a big supplier to China and China’s economic growth rate has been one of the major drivers for some time now. If China cools, so does everyone else, but for Australia, the effect is even bigger. In a way, Australia is a high-beta bet on global economic growth.
JPY, or the Japanese yen, is a good risk-off currency as the country is a commodity importer, but at the same time a relatively closed economy and thus less affected by global trends.
Together, the pair has even more merit as a RoRo candidate as AUD has relatively high interest rates, while the JPY has low rates. This makes the pair a popular candidate for a carry trade, where an investor buys the high-yielding currency and finances the purchase by short-selling a currency that has a lower interest rate, thus pocketing the interest rate differential on average. As carry trades are mostly done by institutional investors like hedge funds, every time money gets tight, carry trades tend to be unwound in a hurry. Thus, the pair will also act as proxy for the global liquidity and the level of risk aversion.
Check My Chart Below
My recommendation : short the pair between 100.00 - 102.00 with stop @105.50 targets @93.00 and @88.00 ( 4 - 8 weeks ).
Aymanfxsignals Forex Performance results are updated for 2013 & 2014 .
You can send an email to Aymanfxsignals@yahoo.com to check the Full Results (Live Statement - PDF)
Ayman Khlifat on Twitter : @Aymankkhlifat
Email : Aymanfxsignals@yahoo.com
During the most volatile periods of the financial crisis, risk on, risk off (RoRo) became a household name on trading floors around the world. RoRo refers to a situation in which investors either chase risky assets like stocks and currencies with high interest rates (risk on), or chase safer assets like treasury bonds and safe-haven currencies (risk off).
For a while now, AUDJPY has been the one of the most reliable RoRo meters around. There are several reasons why this is the case, so let’s begin by breaking up the currency pair to its components.
AUD, or the Australian dollar, is a perfect candidate for a risk on-currency as the country is a commodity producer, making it very vulnerable to shocks to the global economy. At the same time, it is a big supplier to China and China’s economic growth rate has been one of the major drivers for some time now. If China cools, so does everyone else, but for Australia, the effect is even bigger. In a way, Australia is a high-beta bet on global economic growth.
JPY, or the Japanese yen, is a good risk-off currency as the country is a commodity importer, but at the same time a relatively closed economy and thus less affected by global trends.
Together, the pair has even more merit as a RoRo candidate as AUD has relatively high interest rates, while the JPY has low rates. This makes the pair a popular candidate for a carry trade, where an investor buys the high-yielding currency and finances the purchase by short-selling a currency that has a lower interest rate, thus pocketing the interest rate differential on average. As carry trades are mostly done by institutional investors like hedge funds, every time money gets tight, carry trades tend to be unwound in a hurry. Thus, the pair will also act as proxy for the global liquidity and the level of risk aversion.
Check My Chart Below
My recommendation : short the pair between 100.00 - 102.00 with stop @105.50 targets @93.00 and @88.00 ( 4 - 8 weeks ).
Aymanfxsignals Forex Performance results are updated for 2013 & 2014 .
You can send an email to Aymanfxsignals@yahoo.com to check the Full Results (Live Statement - PDF)
Ayman Khlifat on Twitter : @Aymankkhlifat
Email : Aymanfxsignals@yahoo.com
