AUD/USD: A re-test of 2022 lows seems inevitable

US-Japanese yield differentials, real or nominal, five or ten years, are wider today than they were when USD/JPY spiked briefly above 150, 11 months ago. Only fear of a policy reaction is holding the Yen here. A break would complicate things, adding downward pressure to the Yuan and the rest of the Asia/Pacific currencies as well. And if the Japanese start intervening in earnest, that will add to upward pressure on US yields too. Today’s small AUD bounce is unlikely to represent a low.

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