Bitcoin’s (BTC) bullish momentum has hit a snag this week for a number of causes, together with a weaker stateside demand. Now, the Australian dollar-Japanese yen change fee or the AUD/JPY pair, the basic danger barometer, has turned south once more, signaling warning to danger asset bulls.
The Australian greenback (AUD), a commodity forex, is a proxy for international financial well being, significantly for rising markets and China. Alternatively, the Japanese yen (JPY) is seen as a safe-haven forex that buyers flip to throughout occasions of stress. Thus, a decline in AUD/JPY is taken into account a risk-off sign.
Matt Simpson, an analyst at The Metropolis Index, summed it up in his evaluation as follows: “As AUD/JPY is a classic barometer of risk, we should take note that all is not looking well around current levels. If AUD/JPY tanks, it’s likely to be followed by risk in general.”
A crypto bull would possibly brush off the FX drama as a non-event, significantly in opposition to the backdrop of BTC’s current meteoric rise near $100,000, however historical past suggests in any other case.
Keep in mind late July and early August? The Japanese yen started rising on rumors that the Financial institution of Japan (BOJ) was about to hike charges, which it did on the finish of the month. The AUD/JPY pair dropped over 8% to 98 in July, hinting at a wave of danger aversion that kicked in in the course of the first week of August.
BTC fell from roughly $70,000 to $50,000 because the yen energy led to merchants closing bullish bets in danger belongings funded by a budget JPY-denominated loans. The AUD/JPY pair ultimately discovered a flooring at 90 and rebounded alongside different danger belongings.
Quick ahead to now, the AUD/JPY pair has dipped beneath the trendline, characterizing its restoration from the early August low of 90. The breakdown factors to a renewed energy within the yen accompanied by a rising chatter of a potential BOJ fee hike subsequent month.
If that is not sufficient, markets are second-guessing the potential for the Federal Reserve slicing charges by one other 25 foundation factors subsequent month and commerce warfare fears are resurfacing with President-elect Donald Trump’s plans to impose the supposedly-inflationary tariffs on Mexico, Canada and China.
“Expectations are growing that the BOJ will raise rates again in December. This comes amid the prevailing view that the Fed will keep rates on hold at the December FOMC meeting,” ING mentioned in a notice to shoppers this week, including it expects the BOJ to raise the benchmark borrowing prices in December.
“On 21 November, [BOJ governor] Ueda left the door open for further tightening, stating that the BOJ would ‘decide at each meeting,’ fueling speculation of a December rate hike,” ING defined.
BTC bulls ought to maintain their eyes peeled for spherical two of the yen-led risk-off situation, which may probably push costs nicely beneath $90,000.
