The pair has been stuck in a 3% range since Jan 11
For more than 2 months, AUD/JPY has chopped back and forth in a range of 77.50-79.85 -- just 3% in a pair that can move more than that in a day.
While frequent bouts of volatility have hit elsewhere, this pair has been quiet since the flash crash on January 3/4.
Today AUD is the top performer and JPY is the laggard. The pair is rallying as it rebounds from another test of the bottom of the range. It's now back to the midpoint as the waiting game continues.
This might be the key market to watch anywhere. A break on either side of this range would be a big statement about global growth and where central bank interest rates are headed. The market is pricing in a 74% chance of an RBA cut this year, that's up from just 22% when this range started. Yet there's been no big reaction in the FX market.
When it breaks, I could easily see a continuation of 3% in either direction and perhaps double that.There are good arguments for a move either way but I think the trade is to wait for a break with a close outside the range and then to go with it.
