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Japan became the first country to enter recession, AUD / JPY broke through key resistance!

Abstract: On Tuesday (May 19), when the market was biased towards a substantial recovery due to good progress in vaccine research and development, the Japanese ruling party was considering officially declaring the country ’s economy in recession. Japan, the world ’s third largest economy, recorded two consecutive quarters of GDP Negative growth, what opportunities do major currencies deposit against the yen?


The panic caused by the trade situation dissipated on Tuesday (May 19). The European and American stock markets generally rose overnight, and the Asia-Pacific stock market also rose across the board. The main reason is that the vaccine company Moderna said that the vaccine MRNA-1273 for the new coronary pneumonia is safe and Well tolerated, it is expected that the final phase of the vaccine trial will begin in July. On the disk, traditional safe-haven assets such as the US dollar, gold, and yen weakened, while commodity currencies AUD and NZD; crude oil, etc., all strengthened.

It is worth noting that there is news that "Japan Economic News" reports that the Japanese ruling party is considering officially declaring the country's economy into recession, which does not seem to be surprising. The first quarter of Japan's real GDP released on Monday (May 18) The initial value fell by 3.4% year-on-year, better than expected by 4.7% year-on-year, but combined with the revised fourth quarter of 2019, GDP decreased by 7.3% year-on-year, which means that Japan has met the definition of a technical recession. How to avoid risks? Click here for core skills in foreign exchange trading, fundamental analysis, technical analysis and fund management.

There is no doubt that the impact of the epidemic on Japan is huge. Although Japan entered the anti-epidemic stage earlier than countries such as Europe and the United States, the effect was not good. Previously, it was postponed to resume work and resume production, which greatly suppressed the already weak Japan. Inflation and economic growth, and according to news, Japanese clothing giant RENOWN announced on Monday (May 18) that it has initiated bankruptcy protection procedures under the Civil Renewal Law, and RENOWN is a century Historical comprehensive fashion group.

More serious is that the Bank of Japan's long-term negative interest rate has limited room for further interest rate cuts. During the epidemic, the Fed has cut interest rates by 150 basis points to 0-0.25%, and launched a large-scale fiscal stimulus policy and unlimited QE; the European Central Bank The interest rate of the targeted refinancing operation (TLTRO Ⅲ) was lowered again by 25bp to cut interest rates in disguise, and an emergency purchase plan worth 870 billion euros was launched, which made the Bank of Japan seem stretched.

The International Monetary Fund (IMF) had previously expected that the global economy would decline by 3% in 2020, including a 5.9% decline in the US, a 7.5% decline in the euro zone, and a 5.2% decline in Japan. In any case, the yen is currently under more pressure. On the one hand, the continued rebound in market risk appetite has caused the yen to sell off, while the weak domestic economy in Japan and the extension of the Tokyo Olympics have also put the yen under pressure.

Investors can focus on Japan ’s annual rate of April merchandise exports announced on Thursday (May 21) and the initial value of Japan ’s May Nikkei Manufacturing Purchasing Managers ’Index on Friday (May 22). The annual rate of the consumer price index, if the data does not perform well, is expected to provide further downward momentum for the yen.

AUD / JPY technical analysis: break through the key resistance of 70.0, the market outlook is expected to rise to the level near 72.70


The hourly chart shows that the Australian dollar / yen has successfully broken through the key level of 70.0. Given that the exchange rate is currently forming a central expansion state, this means that the uptrend opened by the Australian dollar / yen from the low of 68.70 on May 14 will determine whether the mid-term uptrend can continue. Once the subsequent AUD / JPY stabilizes at 70.0 and accelerates its rise, the outlook is expected to rebound further and challenge the 72.70 level. (By Billy)