AUD/JPY drops to 4-1/2 month lows on risk aversion in the Asian markets

The AUD/JPY pair is fast losing height, now trading around 83.20 levels as Asian equity markets suffer losses on the prospects of a sharp rise in the US rates.

This is the lowest the pair has been since late November.

Fed’s two-way policy tightening

The Fed minutes released overnight showed policymakers may begin trimming the balance sheet size later this year. The central bank also sees scope for gradual rate hikes.

The Fed is more likely to stop reinvesting the proceeds from its bond holdings and then slowly dump the bonds, which could push up the treasury yields. Moreover, the Asian investors fear that could lead to a sharp rise in the US rates, resulting in an outflow of funds to US.

AUD/JPY Technical Levels

A break below 83.00 (zero figure) would open doors for 82.60 (Nov 15 low) and 81.83 (200-DMA). On the higher side, breach of resistance at 83.58 (previous day’s low) could yield  re-test of 54.00 (5-DMA + zero figure) and 84.46 (10-DMA).