MS TOTW G10 – Sell AUD/JPY: FXWW

From the FXWW Chatroom – AUDJPY has rallied in the past few weeks on the back of the risk rebound, and is back near levels where we think shorts offer good risk/reward. The main focus this week is on US CPI, where the outcome is likely to point in favour of a stronger JPY. Should inflation surprise on the upside, indicating rising inflationary pressure and pushing bond yields up, risk is likely to come under selling pressure which should weaken AUDJPY. On the contrary, a downside surprise in inflation should push US bond yields lower, which should weaken AUDJPY too as the JPY is more sensitive to US yields. We like AUDJPY shorts strategically too as tightening global liquidity does not bode well for risk appetite in the medium term. The main risk to this trade is a strong rally in risk appetite.

We like to sell AUD/JPY at market with a target of 79.00 and stop of 83.05
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