Australian dollar setups following hot inflation print: AUD/JPY, EUR/AUD, GBP/AUD

• Australia’s March quarter inflation report came in far hotter-than-expected
• RBA are no longer expected to cut interest rates this year
• We look at the technical implications for AUD/JPY, EUR/AUD and GBP/AUD

It’s not just AUD/USD and RBA interest rate outlook that have been shaken up by Australia’s hot March quarter inflation report with the Australian dollar gaining sharply against the crosses, especially currencies whose central banks are still expected to cut rates this year.

AUD on a tear against the crosses

The Aussie has already broken new ground against the Japanese yen and is threatening to do the same against the British Pound and euro, making it an ideal time to look at the technical setup for AUD/JPY, GBP/AUD and EUR/AUD ahead of major earnings releases from Microsoft, Meta and Alphabet, along with US core PCE inflation on Friday.

 It’s those events that are most likely to influence the risk-sensitive AUD heading into the weekend, especially with many Australians talking a four-day long weekend due to the ANZAC day public holiday on Thursday.

AUD/JPY

AUD/JPY has surged from the lows stuck last Friday in Asia, printing a bullish pin bar on the day before following it up with a string of bullish daily candles. The thrust higher following the inflation report has seen AUD/JPY lift to levels not seen since 2014.

Momentum remains to the upside, suggesting dip buying remains the most effective strategy near-term. For short-term traders, you may want to consider buying now with a trailing stop below 100.80, the former decade-high set on April 9. The initial target would be 101.35, a minor level established a decade ago. Beyond, the 2014 high of 102.86 would be on the radar.

For those with more patience, you could wait for a potential pullback below 100, allowing for a stop to be set below 99.50 targeting the same levels mentioned above.

While upside is preferred near-term, given the threat of possible intervention form the Bank of Japan to support the yen, it’s important to ensure stops are placed at appropriate levels to account for that risk materialising.

GBP/AUD

GBP/AUD is another cross contemplating a breakout, peeking below minor horizontal support starting from 1.9120. Traders may want to consider helping it on its way, selling the break with a stop above the level for protection.

While GBP/AUD did a little bit of work either side of 1.0930 in holiday-thinned trade at the start of the year, there’s not a lot of major support until 1.8900. Below, 1.8800 is a minor level with more pronounced support kicking in from 1.8640.

Price momentum is to the downside, suggesting that may be the path of least resistance in the near-term.

EUR/AUD

EUR/AUD has a less compelling story when it comes to trade ideas, although with momentum swinging around to the downside, selling rallies is preferred near-term.

Wait to see how the price interacts with uptrend support located at 1.6410. if the price breaks lower, sell with a stop above the level for protection. 1.6378 is an important level to overcome initially, with only minor support at 1.6350 and 1.6270 standing in the way of a deeper pullback towards support from 1.6170.

Alternatively, if the price bounces from uptrend support, considering buying with a stop below the level for protection. 1.6517 and 1.6620 are two potential trade targets.

-- Written by David Scutt

Follow David on Twitter @scutty