Charts courtesy of Ninjatrader

The AUD/JPY is often used as a proxy for market sentiment and risk. In other words when the pair rises markets are seen as benign with traders and investors prepared to take on more risk, but the daily chart for the pair does not inspire great confidence, and the reasons are as follows.

Over the past few sessions, we have seen rising prices accompanied by falling volume, which is a classic VPA anomaly. Moreoever, this has since been followed by several days where the pair has attempted to rally but then closed near the open, which again is a bearish signal. And this has been duly confirmed in this morning’s trading session with the pair moving back to test the volume point of control which sits in the 81.20 region.

This morning’s market jitters have also been ascribed to the Italian government wanting to increase the country’s budget deficit to 2.4% of gdp as opposed to 2% which, according to Bank of America is seen as a ‘watershed level’. As a result, Italian bank shares have fallen and euro followed suit, although it has since recovered some poise. Italian bond yields also spiked higher. And following on from yesterday’s FOMC and the FED’s projection of increasing interest rate rises in 2019 will also add to today’s somewhat downbeat mood.