Forex Analysis – Trade of the Day: AUD/JPY 9th September 2014

Australia – NAB Business Confidence

At GMT 1:30 a.m., National Australia Bank Limited released its monthly Business Confidence figure, which measures the level of a diffusion index based on surveying businesses in the country. However, while conducting the survey, the NAB excludes the farming sector.

Since businesses react more quickly to changing business climate, their confidence level indicates future economic activity in the country. Therefore, analysts consider the NAB Business Confidence index to be a leading indicator of the Australian economy.

Last month, the NAB Business Confidence index reading came out at 10. However, this month, it decreased to 8, which was also the reading from July, 2014.

Japan – Consumer Confidence

At GMT 5:00 a.m., the Japanese Cabinet Office released the monthly national Consumer Confidence figure, which measures the level of a composite index based on surveying around 5,000 families in the country.

Analysts consider the Consumer Confidence data to be a leading indicator of the economy as a higher level of confidence leads to further spending, that help invigorate the economy. As spending goes up, it drives the demand up, which eventually lifts the production and supply. Also, it can contribute to “demand pull” inflation, which may motivate the central bank to reconsider the overnight interest rates in the future.

Last month, the Japanese Consumer Confidence figure came out at 41.1 and this month, the forecast was set at 42.3. However, the actual figure came out slightly lower, at 41.2.

Trade Recommendation for the AUD/JPY

AUD/JPY - 9th September
Since the formation of a bullish pin bar on August 8, the The AUD/JPY has been trading upwards, and formed a strong upward sloping trend line. Even though a slight decrease in the NAB Business Confidence would have a negative impact on the Australian Dollar, however, lower than expected Japanese Consumer Confidence would be considered as a negative news for the Japanese Yen. Hence, there are no macroeconomic reasons to expect the current uptrend to reverse anytime soon.

If the AUD/JPY price closes above the 98.70 level, it would attract more buyers, which may pull the price further up towards the psychological resistance around the 100.00 level. In that situation, it would suggest a CALL in the AUD/JPY.

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About our Forex Analyst: Asif Imtiaz

Asif Imtiaz

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