The AUD/JPY pair has shown a slight recovery from a nearly one-month low, trading around the 96.26 region reached during Friday’s Asian session. Currently, the pair is holding modest intraday gains in the mid-96.00s range, following the release of positive Chinese economic data. However, caution is advised for bullish traders due to the underlying market conditions.
The National Bureau of Statistics (NBS) of China reported a 5.4% economic expansion in the fourth quarter of 2024, exceeding the 4.6% growth seen in the previous quarter. This growth surpassed the consensus estimate of 5%, and was bolstered by stronger-than-expected Retail Sales, which rose by 3.7% in December, compared to 3% in November. Additionally, Industrial Production grew by 6.2%, surpassing the forecast of 5.4%, while Fixed Asset Investment advanced by 3.2% year-over-year in December, lending support to the Australian dollar.
Furthermore, a slight dip in the Japanese Yen (JPY) provided some upward momentum for the AUD/JPY cross. However, a significant depreciation of the Yen remains unlikely amid increasing expectations that the Bank of Japan (BoJ) will raise interest rates in its upcoming meeting. This view was reinforced by comments from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino. Additionally, concerns over a potential tariff plan from US President-elect Donald Trump could fuel demand for the safe-haven JPY, capping any gains for the Australian Dollar.
On the Australian side, the dovish stance of the Reserve Bank of Australia (RBA) adds an element of caution, making further short-term gains for the AUD/JPY uncertain. As traders anticipate the BoJ’s monetary policy meeting on January 23-24, market participants are likely to adopt a wait-and-see approach, looking for clues on the next directional move for the currency pair.
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