The AUD/JPY currency pair witnessed a slight retreat on Tuesday following its gains in the previous session. However, buoyed by an overarching optimistic mood, the Australian Dollar (AUD) appears poised to receive support, potentially bolstering the AUD/JPY cross, a trend possibly influenced by a relaxed geopolitical climate in the Middle East.
Australia’s Judo Bank Composite Purchasing Managers Index (PMI) soared to a 24-month high of 53.6 in April, surpassing the previous month’s figure of 53.3. This surge signifies an accelerated expansion within the Australian private sector during the second quarter, largely propelled by robust growth in the services sector.
Conversely, the Japanese Yen (JPY) grapples with challenges stemming from an expanding yield gap between Japan and several other major economies. This discrepancy prompts traders to borrow JPY and channel funds into higher-yielding assets elsewhere.
Moreover, Reuters reported that Bank of Japan (BoJ) Governor Kazuo Ueda reiterated on Tuesday the central bank‘s readiness to raise interest rates if trend inflation moves closer to its 2% target, aligning with its projections. Ueda also highlighted the difficulty in predicting the optimal timeframe for the BoJ to amass adequate data before contemplating a policy shift.
In the realm of market movements, the AUD/JPY consolidates amidst an enhanced risk sentiment. Notable updates include Australia’s Judo Bank Manufacturing PMI ascending to an eight-month high of 49.9 in April, contrasting with March’s 47.3. However, Services PMI slightly declined to a two-month low of 54.2 compared to the previous reading of 54.4.
Japan’s economic landscape witnessed a mixed bag of results, with Jibun Bank Manufacturing PMI improving to 49.9 in April, surpassing expectations, while Services PMI rose to 54.6 from the previous reading of 54.1.
Furthermore, China’s influence on the market is notable, with the People’s Bank of China (PBoC) reportedly planning to decrease the Medium-term Lending Facility (MLF) rate to lower funding costs. This development, scheduled for May 15, could potentially impact the Australian market due to the close trade ties between the two nations.
In the technical realm, the AUD/JPY maintains its position around 99.90, supported by the significant level of 99.65. The presence of a daily ascending channel, coupled with the 14-day Relative Strength Index (RSI) holding above the 50 level, underscores a burgeoning bullish sentiment. Resistance levels lie at 100.00, 100.50, and April’s peak of 100.81, while support levels are anticipated at 99.50, 99.00, and 98.50, respectively.
