This trade captures dual macro pressures: deteriorating risk sentiment in Asia and mounting Japanese political instability.

On the Australian side, the AUD remains vulnerable due to its tight correlation with China’s growth trajectory. Recent weakness in Chinese credit data and stimulus hesitancy suggest downside pressure remains, particularly for commodity-linked currencies.

On the yen side, although political noise has weakened JPY temporarily, it also introduces volatility and uncertainty that favors defensive flows over time. If Ishiba resigns or if leadership speculation intensifies, we could see a flight to safety within the Asia-Pacific region, with JPY benefiting relative to AUD.

Technically, AUD/JPY is at a short-term resistance zone, and macro risk-off flows could trigger a clean reversal.

SHORT AUDJPY

Jul 24 2025