The AUD/JPY pair experienced a downturn on Tuesday, prompted by disappointing Australian Retail Sales figures. These numbers, falling below expectations, hold significance as they directly correlate with inflation and growth prospects, potentially influencing the Reserve Bank of Australia‘s (RBA) stance on interest rates. However, the Australian Dollar (AUD) found support amidst higher-than-expected domestic inflation data, fueling speculation that the RBA may not be inclined to implement interest rate cuts in the near future.
In light of these developments, Australia’s largest mortgage lender, Commonwealth Bank, revised its forecast for the timing of the first RBA rate cut. They now anticipate a single cut in November, with further decreases to follow. Gareth Aird, CBA‘s head of Australian economics, outlined projections of quarterly rate cuts through 2025.
Meanwhile, on the Japanese front, market attention remains attuned to potential intervention actions following reports of Tokyo’s involvement in currency markets. Lower-than-expected domestic Retail Trade data further bolster the dovish stance of the Bank of Japan (BOJ). Expectations of sustained interest rate differentials between Japan and other nations suggest a predisposition for the Japanese Yen (JPY) towards depreciation.
AUD/JPY Reacts to Retail Sales
The day’s market movers include:
A 0.4% month-on-month decline in Australian Retail Sales for March, contrasting with expectations and prior growth.
China’s Manufacturing Purchasing Managers Index (PMI) for April, registering slightly lower than anticipated but still showing resilience.
Japan’s Retail Trade data, which saw a year-on-year increase below expectations, contributing to the cautious outlook.
Australian stock market activity, with limited changes as investors await the US Federal Reserve’s rate decision.
Comments from Masato Kanda, Japan’s senior currency diplomat, underlining the currency’s influence on import prices and authorities’ readiness to act accordingly.
Technical Analysis: AUD/JPY Trends Lower
Technically, the AUD/JPY pair hovers around 102.50, near the lower boundary of an ascending wedge pattern on the daily chart. Despite this, the 14-day Relative Strength Index (RSI) remains above the pivotal 50-level, signaling prevailing bullish sentiment.
Resistance is anticipated at 105.00, coinciding with the upper boundary of the wedge. A breach above this level could propel the pair towards April 2013 highs.
Conversely, support rests at the psychological level of 102.00, aligned with the wedge’s lower boundary. A breach below may lead to further decline towards the nine-day Exponential Moving Average (EMA) at 101.51.
