The AUD/JPY pair retraced recent gains in the wake of notable intraday strength observed in the Japanese Yen (JPY), potentially influenced by reported interventions by Japanese authorities to bolster the domestic currency, as highlighted by Reuters. This development comes amidst the closure of Japanese markets on Monday for Showa Day.
The Japanese Yen faced significant downward pressure earlier in the week, plummeting to multi-decade lows following the Bank of Japan‘s decision to maintain its policy settings unchanged. Factors contributing to this decline include uncertainty surrounding the BoJ’s rate outlook, indications of subdued inflation in Japan, and an overall buoyant sentiment in equity markets, all of which have eroded the JPY’s traditional safe-haven appeal. Furthermore, expectations of a prolonged wide interest rate differential between Japan and other countries suggest a bias towards further depreciation of the JPY.
Conversely, the Australian Dollar (AUD) received upward support, driven by growing hawkish sentiment surrounding the Reserve Bank of Australia (RBA) in response to unexpectedly high Consumer Price Index (CPI) inflation data released last week. Economists, including Warren Hogan of Judo Bank, have revised their forecasts significantly, anticipating multiple rate hikes by the RBA throughout the year, with the first expected as soon as August. Market attention now turns to Tuesday’s Retail Sales data, a crucial gauge of Australia’s consumer spending with significant implications for inflation and GDP.
AUD/JPY Retraces Amidst Potential Market Intervention
Australia’s stock market rallied robustly on Monday, buoyed by a strong performance on Wall Street, particularly driven by tech giants like Microsoft and Alphabet’s parent company, Google. The ASX 200 Index witnessed a recovery across all 11 industry sectors, reclaiming ground lost earlier.
Furthermore, revisions by TD Securities suggest a postponement of the anticipated rate cut by the RBA until February 2025, signaling strength for the Australian Dollar and the AUD/JPY pair.
BoJ Governor Kazuo Ueda underscored the central bank‘s commitment to maintaining accommodative monetary measures to support economic recovery and stability during the post-policy meeting press conference. Additionally, Tokyo’s Consumer Price Index figures for April fell below expectations, indicating persisting inflationary challenges.
Reuters reported the BOJ’s intention to project inflation close to its 2% target and signal readiness to raise interest rates to prevent further Yen depreciation.
In Australia, the CPI reached an all-time high in Q1 2024, reflecting ongoing inflationary pressures. Japanese companies’ plans to increase pay scales could potentially bolster consumer purchasing power and contribute to upward price pressures.
Technical Analysis: AUD/JPY Seeks Support Near 102.00
The AUD/JPY pair traded around 104.50, surpassing the upper boundary of the daily ascending channel. With the 14-day Relative Strength Index (RSI) trending above 50, bullish sentiment prevails. Immediate resistance lies at 105.00, with potential to test April 2013 highs at 105.43 upon breakout.
On the downside, support is anticipated at 104.00 and 103.00, followed by the nine-day Exponential Moving Average (EMA) at 101.59. A breach below this level could lead to a further decline toward 101.50, aligned with the lower boundary of the ascending channel.
