Societe Generale Research discusses AUD/JPY outlook and recommends staying short the cross on a medium-term basis.
"With risk sentiment so fragile the yen appears to be diverging from measures of risk. The chart plots AUD/JPY against the MSCI world equity index and to the naked eye, it shows how AUD bulls were frustrated in 2017/2018, and how yen bulls are being frustrated at the moment," SocGen notes.
A rolling correlation of AUD/JPY and equity indices is better than the (still positive) correlation with USD/JPY but what's surprising is that in the last few weeks, it hasn't really fallen much. It just feels as though it has!...The very slow and controlled crawl in USD/CNY towards 7 plays a part in the yen's inability to rally, and we worry about what happens when that level breaks, but we're persisting with AUD/JPY shorts, because the AUD will surely feel a move in USD/CNY more keenly than the yen will," SocGen argues.