25/09/24

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The AUD/JPY currency pair is experiencing continued interest from buyers, showing resilience despite the recent Australian inflation figures. In August, the headline Consumer Price Index (CPI) eased to 2.7% year-over-year, while the core CPI remained above the Reserve Bank of Australia’s (RBA) target range. Many investors are speculating that the Bank of Japan (BoJ) will implement a rate hike in 2024, which may mitigate losses for the Japanese Yen (JPY) and temper significant gains in the AUD/JPY pair.

During the Asian trading session, the AUD/JPY is showing a positive trend, currently hovering just below the vital 99.00 level and nearing a three-week high achieved the day before. However, the mixed economic landscape suggests that bullish traders should exercise caution before seeking to capitalize on the upward movement seen over the past two weeks.

This optimism for the Australian dollar is bolstered by expectations of more aggressive monetary easing from the Federal Reserve and recent stimulus measures introduced in China aimed at stabilizing its sluggish economy. The resultant positive sentiment in global equity markets is detracting from the appeal of the safe-haven JPY, and reinforcing demand for the risk-oriented Australian dollar. Furthermore, the RBA’s assertive stance on maintaining monetary policy continuity adds further support to the AUD/JPY.

Recent communication from the RBA emphasized a need for restrictive policy until there is solid evidence that inflation is sustainably moving towards the target range. Data from the Australian Bureau of Statistics revealed that the headline CPI experienced a notable decline in August, the lowest since early 2022, largely attributed to state government rebates. The core CPI also showed a decrease but continues to be above RBA’s target, indicating that rate cuts are unlikely in the short term. The anticipation that the BoJ will increase interest rates again by the end of the year is expected to provide a buffer against further JPY losses.

Looking ahead, attention turns to the BoJ meeting minutes scheduled for release on Thursday, which, along with prevailing market sentiment, will likely influence JPY demand and impact the AUD/JPY dynamics. Technically, a sustained move above the 50-day Simple Moving Average could serve as a bullish signal, although any upward trajectory may face resistance near the psychological 100.00 level, which coincides with the 200-day SMA.