The AUD/JPY pair demonstrates resilience for the third consecutive day, rebounding from intraday losses on Wednesday. The Australian Bureau of Statistics’ (ABS) release of Consumer Price Index (CPI) data, surpassing expectations, has influenced the trajectory of the Reserve Bank of Australia‘s (RBA) monetary policy outlook, thereby bolstering the Australian Dollar (AUD) and supporting the AUD/JPY cross.
Enhanced risk appetite, coupled with gains in the ASX 200 Index, particularly propelled by advancements in technology and healthcare stocks, contributes to the upward momentum of the Australian Dollar (AUD). Australian equities mirror the positive trajectory witnessed on Wall Street, driven by robust corporate earnings reports that have uplifted market sentiment. Furthermore, a reduction in tensions in the Middle East further fosters a positive market environment.
Conversely, the Japanese Yen (JPY) grapples with challenges stemming from the widening yield differential between Japan and several other major economies. This phenomenon prompts traders to borrow JPY and pursue higher yields elsewhere. Despite this trend, Japanese authorities have refrained from intervening thus far. As the Bank of Japan (BoJ) convenes its two-day policy meeting on Thursday, Tokyo may opt to withhold intervention in the currency market until at least the following week, as reported by Reuters.
Market Analysis:
Australia’s Consumer Price Index (CPI) for the first quarter of 2024 exceeded expectations, with a 1.0% quarter-on-quarter increase and a 3.6% year-on-year rise. Additionally, Australia’s Monthly Consumer Price Index (YoY) for March surpassed market forecasts, registering a 3.5% increase.
Data from the Japan Times reveals a notable uptick in the proportion of Japanese companies intending to raise their pay scales, potentially providing support for the Yen.
Technical Analysis:
The AUD/JPY pair hovers around 100.90 on Wednesday, surpassing April’s high of 100.81. A daily ascending channel, coupled with the 14-day Relative Strength Index (RSI) trending above the 50 level, signals strengthening bullish sentiment. The psychological barrier of 101.00 presents immediate resistance, with a breakthrough potentially propelling the AUD/JPY cross towards the upper boundary of the ascending channel at 101.50.
On the downside, key support for the AUD/JPY pair is anticipated at the major level of 100.50. A breach below this level could lead to further downside movement towards the support level of 99.65, followed by the lower boundary of the ascending channel near 99.00.
