CFD Trading Rate Australian Dollar vs Japanese Yen (AUDJPY)

• AUD/JPY faces some selling pressure near 97.43 following the downbeat Australian employment data. 
• The Australian Unemployment Rate rose to 4.1%, the highest since January 2022. 
• Japan's economy entered a technical recession after shrinking in the fourth quarter (Q4) of 2023. 

The AUD/JPY cross loses momentum during the early European trading hours on Thursday. The downtick of the cross is supported by surprisingly weak Australian January employment data. AUD/JPY currently trades around 97.43, down 0.33% on the day. 

The Australian Unemployment Rate rose to a two-year high, coming in at 4.1% in January from the previous reading of 3.9%, worse than the market expectation of 4.0%. The report suggested that the labor market was loosening in the face of a faltering economy and poor consumer demand, according to the Australian Bureau of Statistics (ABS) on Thursday. Meanwhile, the Australian Employment Change arrived at 0.5K in January versus -65.1K prior, below the market consensus of 30.0K. 

This report has spurred speculation that the Australian central bank may adopt a dovish stance in response to the weakening economy, which exerts some selling pressure on the Aussie (AUD). The Reserve Bank of Australia (RBA) Governor Michele Bullock said on Thursday that RBA is in a good position to get inflation down in a reasonable amount of time. 

On the other hand, Japan's economy entered a technical recession after shrinking again in the fourth quarter of 2023, according to preliminary data released from Japan’s Cabinet Office on Thursday. The GDP growth number contracted 0.1% QoQ in Q4 from a revised 0.8% contraction in the third quarter. This figure came in weaker than expectations of 0.3% expansion. Furthermore, the Annualized GDP contracted 0.4% YoY in Q4 versus the 1.4% expansion expected and 3.3% contraction prior.

Investors anticipate the Bank of Japan (BoJ) to abandon its negative interest rate regime at its April policy meeting, once the annual spring wage negotiations confirm a trend of considerable wage growth. However, the downbeat GDP report on Thursday implies that rising inflation threatens domestic demand and potentially supports the case for looser monetary policy for much longer.

In the absence of the top-tier economic data release from the Australian and Japanese docket later this week, the risk sentiment could drive the markets and influence the AUD/JPY cross. 

• AUD/JPY gains ground after the hawkish comments from the Commonwealth Bank.
• Commonwealth Bank CEO Matt Comyn mentioned that the RBA might delay rate cuts until early 2025.
• Japan’s Masato Kanda reiterated that authorities may intervene in the FX market if needed.

AUD/JPY edges higher to near 97.50 during the European session after experiencing a volatile session on Wednesday. The cross reversed intraday losses and entered into positive territory as the Australian Dollar (AUD) strengthened.

The hawkish remarks from Commonwealth Bank CEO Matt Comyn attracted some buyers for the Aussie Dollar and, consequently, acted as a tailwind for the AUD/JPY cross. He suggested that the Reserve Bank of Australia (RBA) might delay interest rate cuts until early 2025 due to steady inflation. Comyn's comments raised concerns about increased living costs for borrowers relying on tax cuts and mortgage relief.

However, the Australian Dollar faced downward pressure as the S&P/ASX 200 Index plunged to recent lows, driven by a selloff in mining and financial stocks following Wall Street's decline overnight in response to stronger-than-expected US inflation figures.

On the other side, Japan’s top currency diplomat Masato Kanda reiterated that authorities stand ready to intervene in the Forex market if necessary. This stance might have bolstered the Japanese Yen (JPY), consequently undermining the AUD/JPY cross during Wednesday's Asian session. Furthermore, Japan's Finance Minister Shunichi Suzuki said that rapid currency moves are undesirable and that the government is watching the market with stronger urgency.

Investors await the preliminary Q4 Gross Domestic Product (GDP) data 2023 due on Thursday. Investors forecast that the Japanese economy could show a growth of 0.3% after contracting by 0.7% in the third quarter.

• The AUD/JPY currently stands at 97.25, showing a 0.25% decrease in Tuesday's trading session.
• Japan's manufacturing activity remains weak with decreasing machine tool orders.
• RBA and BoJ's policy divergence may eventually make the cross recover.

On Tuesday's session, the AUD/JPY suffered modest losses, observed trading at around 97.25. The pair is positioned on turbulent waters as Australia's economic view is fogged with uncertainty while Japan battles with weak manufacturing activity. That being said, the divergent Reserve Bank of Australia (RBA) and Bank of Japan (BoJ) policies may limit the downside for the pair.

The Australian economy depicts an ambiguous outlook. On a positive note, Westpac's Consumer Sentiment index for February reached a 21-month high of 86.0, pointing towards buoyed consumer optimism. However, the National Australia Bank's (NAB) business survey showed a dip to a two-year low of 6 in January, signaling a softer economic environment. In addition, elevated inflation risk levels persist, with RBA's Head of Economic Analysis Kohler remarking that while inflation is decreasing, it will take time to hit the RBA's 2%-3% target range and as for now the market predicts an 85% likelihood of Australia's first interest rate cut as late as in August, adjusted from June at the beginning of the month.

Turning to Japan, January's machine tool orders saw little improvement, falling 14.1% YoY, from -9.6% in December, reflecting a weak manufacturing activity. Notably, domestic orders dropped 29.1% YoY while foreign orders fell only 6.2% YoY, highlighting internal economic concerns. In addition, January PPI remaining steady at 0.2% YoY, signals a minimal pipeline price pressure. Regarding the Bank of Japan's policy, normalization looks set to occur after the spring wage negotiations if there is a confirmed pick-up in wage growth. In the meantime, markets anticipate a June liftoff, keeping a close eye on the economic revival which would demand a sooner liftoff.

AUD/JPY technical analysis

On the daily chart, the Relative Strength Index (RSI) data reveals that the bearish dominance is fading away as the RSI jumps above 50. A closer look at the Moving Average Convergence Divergence (MACD) histogram data reveals that the histogram has consistently printed decreasing red bars, indicating a falling negative momentum and now printing a green bar. These insights suggest that the seller’s momentum is waning with bulls gradually taking over.

AUD/JPY daily chart

• The AUD/JPY rose in Monday's session at 97.60 with a gain of 0.23%.
• Hourly chart shows RSI and MACD dip, highlighting short-term buyers' shift to consolidate gains.
• The overall trend still favors the bulls.

In Monday's session, the AUD/JPY is trading at 97.60, registering a gain of 0.23%. The pair has seen a recent push from the buyers, which made indicators reach overbought territory and now indicators are consolidating. The overall trend still favors the buyers as the pair is still above its main Simple Moving Averages (SMAs)

Analyzing the daily chart, the Relative Strength Index (RSI), which resides within the positive territory, continues to show an increasing trend, suggesting that buyers are currently exerting pressure on the market. This aligns with the Moving Average Convergence Divergence (MACD) histogram, which printed a green bar implying that the bulls jumped back a into positive territory.

Concentrating on the hourly chart, the RSI dipped back from the overbought area struck earlier in the session to the positive domain, hinting at a more balanced, albeit still buyers-favoured, market in recent hours. In line with that, the MACD histogram has been rising, throughout the session but now seems to have flattened as buyers are taking a breather.

Taking the pairs' position into account relative to its main Simple Moving Averages (SMAs), the broader trend is on the buyer's side, as the pair is above the 20, 100, and 200-day SMAs. Yet, for the rest of the session, the cross may continue side-ways trade to consolidate the gains from its recent push.

AUD/JPY daily chart

• AUD/JPY halts its winning streak on cautious mood due to Middle East tension.
• The Middle East tension has escalated due to Israel’s conclusion of a series of strikes in southern Gaza.
• The Australian Dollar encountered challenges stemming from the decline in the Australian money market.

AUD/JPY snaps its four-day winning streak, which could be attributed to the market caution due to geopolitical conflict in the Middle East. The Japanese Yen (JPY) could have enjoyed the safe-haven status after Israel concluded a series of strikes in Gaza's southern city of Rafah. The AUD/JPY cross edges lower to near 97.30 during the Asian hours on Monday.

On Sunday, Israeli Prime Minister Binyamin Netanyahu expressed intentions to escalate the military operation there, but US President Joe Biden urged caution, insisting on a credible plan. Hamas also warned against a ground offensive in Rafah, fearing it could impact future hostage releases.

However, investor sentiment towards the Japanese Yen weakens as they perceive the Bank of Japan (BoJ) to adopt a cautious approach towards rate hikes following its departure from ultra-dovish monetary policy. BoJ Deputy Governor Shinichi Uchida's recent remarks suggest that the central bank is unlikely to pursue aggressive tightening, even after abandoning negative interest rates.

The increase in Chinese New Loans, reported on Friday, signifies a positive development for economic activities in China. This might have potentially offered support for the AUD/JPY pair. The close trade relations between China and Australia might have amplified this effect. However, with Chinese markets closed for the Lunar New Year holidays, the impact may be limited in the short term.

Meanwhile, the Australian Dollar (AUD) encountered challenges stemming from the decline in the Australian money market. Despite a record surge in United States (US) markets on Friday, the share market in Australia trended lower in early trading on Monday, constraining the Aussie Dollar's performance, which in turn, helped to undermine the AUD/JPY pair.

• The AUD/JPY pair stands at 97.409 showing 0.50% gains in the last session of the week.
• The main reasons for the upward movements are the divergent RBA and BoJ monetary policy, which benefit the Aussie.
• Daily Chart indicators show strong buying momentum while four-hour indicators flash overbought conditions.
• Despite the looming correction, the overall trend is bullish.

In Friday's session, the AUD/JPY was observed rising to 97.40, registering a t gain of 0.50. This performance is primarily shaped by the contrasting economic stances of the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ). With the daily chart indicating a bullish momentum and the bulls asserting their dominance, the prevailing outlook seems positive. However, the four-hour chart shows indicators have entered the overbought zone, suggesting a potential for imminent correction.

In line with that, recent statements by the RBA Governor Bullock suggest a balanced perspective with the potential for future interest rate changes. The possibility remains open for both an increase or a standstill, subject to inflation and economic growth. The market expects the RBA's first rate cut in August, with a total easing of 50 bp anticipated for the year. In contrast, the Bank of Japan BoJ maintains a dovish stance, with Governor Ueda affirming that accommodative financial conditions may continue after the current negative rates era. As per the latest data, the likelihood of rate liftoff from the BoJ is forecasted for June, with only 25 bps of tightening for the rest of 2024, and as long as markets bet on a dovish BoJ, the pair may see further upside.

AUD/JPY technical analysis

On the daily chart, the Relative Strength Index (RSI) boasts a positive trajectory within positive territory, suggesting buyers maintain control in line with the Moving Average Convergence Divergence (MACD) histogram which reveals diminishing red bars, suggesting that the buyers are in command. On a broader perspective, the pair resides above the 20-day, 100-day, and 200-day Simple Moving Averages (SMAs). This emphasizes that bullish forces hold a firm grip on the larger time frames with the bears nowhere to be found.

AUD/JPY daily chart

Moving to the four-hour chart, the momentum switches somewhat. Key performance indicators have approached overbought levels, suggesting an imminent correction. A closer look at the RSI confirms this forecast as it ventures into overbought territory. The MACD confirms this pattern as well, with its green bars gradually shrinking. In summary, whilst the bulls seem to be gaining ground currently, an impending correction looms as short-term momentum indicators align to suggest a pullback.

• AUD/JPY gains ground as market sentiment turned bearish on dovish BoJ’s remarks.
• Bank of Japan (BoJ) Governor Kazuo Ueda stated that accommodative conditions are expected to continue even if negative rates are abandoned.
• IMF suggests that Japan should adopt tighter fiscal policy measures and gradually phase out monetary stimulus initiatives.
• The intraday recovery in the Australian money market supports the AUD.

AUD/JPY moves on an upward trajectory for the fourth consecutive session, edging higher to near 97.20 during the European hours on Friday. The sentiment of the JPY’s traders shifted to bearish following the dovish remarks from Bank of Japan (BoJ) Deputy Governor Uchida Shinichi on Thursday. He stated that the central bank would not pursue aggressive rate hikes upon ending negative rates.

Moreover, BoJ Governor Kazuo Ueda commented on Friday, expressing that accommodative conditions are likely to persist even if negative rates are abandoned. He emphasized the importance of monitoring the health of the BoJ balance sheet as the exit from stimulus policy approaches.

The International Monetary Fund (IMF) released its findings following its annual policy consultation with Japan and the Bank of Japan. The report indicates that upside risks to inflation have materialized over the past year. It recommends that Japan should tighten fiscal policy and gradually wind down monetary stimulus measures.

First Deputy Managing Director of the International Monetary Fund, Gita Gopinath, elaborated further, stating that if the BoJ proceeds gradually with clear communication, increases in short-term rates should not result in significant global spillovers. Gopinath also suggests that the BoJ can smoothly transit away from negative rates, given the market's perception that real borrowing costs will remain very low.

The AUD/JPY cross encountered challenges as the S&P/ASX 200 index trended negatively during the early trading hours of Friday, accompanied by declines in coal and iron ore prices. However, the Australian money market managed to recover intraday losses and shift into positive territory, potentially providing support for the Australian Dollar (AUD). This positive momentum for the AUD may act as a tailwind for the AUD/JPY cross.

Reserve Bank of Australia (RBA) Governor Michele Bullock addressed parliament, noting that recent inflation developments are encouraging, but there is still progress needed to meet the target. Bullock also mentioned that if consumption slows faster than anticipated, there would be an opportunity to consider rate cuts. Furthermore, the Commonwealth Bank of Australia (CBA) predicted a reduction of 75 basis points in the benchmark interest rate for 2024, with the first cut expected in September.

• AUD/JPY gains positive traction for the third straight day and climbs to a fresh weekly peak.
• RBA’s warning of more rate hikes and China’s steps to stabilize markets underpin the Aussie.
• A positive risk tone weighs on the safe-haven JPY and remains supportive of the momentum.

The AUD/JPY cross attracts some buying for the third successive day and rallies to a fresh weekly top, around the 96.85 region during the Asian session on Thursday. Spot prices, however, remain well within a multi-day-old trading range, warranting some caution before positioning for an extension of the recent recovery from mid-95.00s, or the monthly trough touched last week.

The Australian Dollar (AUD) continues to be underpinned by the Reserve Bank of Australia's (RBA) hawkish outlook earlier this week, warning that a further rate increase could not be ruled out in the wake of still sticky inflation. Adding to this, China's steps to shore up its battered stock market help offset underwhelming domestic inflation figures and lend additional support to the China-proxy Aussie.

Data from the National Bureau of Statistics showed that China’s Consumer Price Index (CPI) climbed 0.3% over the month in January and declined 0.8% on a yearly basis, both missing expectations for a 0.4% rise and 0.5% fall, respectively. Meanwhile, the Producer Price Index (PPI) came in slightly better than anticipated and fell by the 2.5% YoY rate in January, though does little to ease deflationary concerns.

Meanwhile, the prevalent risk-on mood is seen denting demand for the safe-haven Japanese Yen (JPY), which is further weighed down by less hawkish remarks by the Bank of Japan (BoJ) Deputy Governor Uchida Shinichi. Speaking at a Meeting with Local Leaders in Nara, Uchida said that the BoJ would like to maintain a stable, accommodative monetary environment as the uncertainty over the outlook remains high.

Uchida, meanwhile, expects Japan's economic recovery to continue and the positive wage-inflation cycle to strengthen, while echoing the BoJ's view that the likelihood of sustainably achieving price target is gradually heightening. Furthermore, investors seem convinced that wage growth this year may outpace that of 2023 and pave the way for the BoJ to exit its decade-long ultra-loose monetary policy setting.

This, in turn, should limit any meaningful depreciating move for the JPY and cap gains for the AUD/JPY cross. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bullish traders and supports prospects for a further intraday appreciating move for spot prices.

Technical levels to watch

• AUD/JPY gained ground on RBA’s hawkish stance on monetary policy.
• RBA Governor Michele Bullock did not rule anything in or out regarding policy decisions.
• Japan's Foreign Reserves decreased to $1,291.8 billion in January from the previous figure of $1,294.6 billion.

AUD/JPY trends upwards for the second consecutive day on Wednesday, trading around 96.70 during the Asian session. The hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock on Tuesday have bolstered confidence in the Australian Dollar (AUD), contributing to its strength against the Japanese Yen (JPY).

The Reserve Bank of Australia (RBA) maintained its Official Cash Rate (OCR) at 4.35% on Tuesday, a move that was widely expected. RBA Governor Michele Bullock refrained from making any definitive statements about future policy decisions. She stressed the importance of balanced risks and highlighted the bank's ongoing efforts to gather data confirming a return of inflation to target levels. Governor Bullock mentioned a forecast of 2.8% inflation for the year 2025.

On the other side, Wednesday's release of Japan's Foreign Reserves report indicated a slight decrease, with the figure standing at $1,291.8 billion in January compared to December's figure of $1,294.6 billion. Additionally, on Tuesday, Labor Cash Earnings (Year-over-Year) showed improvement, registering at 1.0% in December compared to the previous reading of 0.7%, albeit falling short of the expected 1.3%.

The Japanese Yen receives support from expectations that another significant pay hike this year will contribute to sustained and stable inflation. This optimism is fueling hopes that the Bank of Japan (BoJ) may gradually move away from its ultra-dovish policy stance. Additionally, the BoJ has hinted at the possibility of ending its negative interest rate cycle, suggesting a potential shift in monetary policy direction.

• The AUD/JPY is positioned at 96.40 with mild gains.
• The RBA held rates steady as expected.
• On the daily chart, the positive slope of the RSI alongside the MACD's decreasing red bars hint at a reduced selling momentum.
• A bullish SMA crossover at the 96.7 level looming with the 20 and 100-day SMAs, hinting at a potential market shift.

In Tuesday's session, the AUD/JPY pair traded mildly higher, hitting a daily high at 96.83 and then stabilizing at 96.40. The latest market movements has been influenced by the diverging monetary policies of the Reserve Bank of Australia (RBA) and Bank of Japan (BoJ) while the Australian’s bank hint of not ruling out further hikes may strengthen the pair. On the technical side, the daily chart suggest that the bulls are holding ground, while the hourly indicators turned flat.

The AUD/JPY pair trades in a complex environment influenced by the monetary policies of the Reserve Bank of Australia (RBA) and the Bank of Japan (BOJ). The RBA recently opted on Tuesday for a hawkish hold, not ruling out further interest rate increases in response to high inflation, while simultaneously reducing growth projections due to a weaker near-term outlook for consumer spending. Meanwhile, Japan reports soft earnings and household spending data, suggesting a continuation of lenient policy settings from the BOJ. A clear divergence in economic conditions and policy directions may fuel further upside for the cross and drive demand to the Aussie. Regarding expectations, the market expects a 50 bp rate cut from the RBA this year, while the BoJ is anticipated to remain on hold.

AUD/JPY levels to watch

On the daily chart, the indicators are displaying a mixed outlook. While the Relative Strength Index (RSI) exhibits an upward trend, it remains in a bearish realm, hinting at potential but not realized bullish activity. The Moving Average Convergence Divergence (MACD) further augments the cautious tone with diminishing red histograms. That said, the position of the cross relative to its Simple Moving Averages (SMAs) offers a ray of optimism. Despite the short-term neutral outlook, a larger view reveals that the pair is abiding above the key 20, 100, and 200-day SMAs. This suggests an overall bull dominancy, with potential room for them to recover lost ground. In addition, traders should eye a potential crossover between the 100 and 20-day SMAs which may fuel further upside.

Shifting focus to the hourly chart horizon, the stage seems more balanced between bulls and bears. Indicators appear to have flattened in a bearish territory, mirroring a stalemate between buyers and sellers. For the rest of the session and heading into Wednesday, the cross may continue to side-ways trade.

AUD/JPY daily chart

• AUD/JPY gains strong positive traction on Tuesday, though the upside potential seems limited.
• The AUD strengthens after the RBA decided to leave the Official Cash Rate (OCR) unchanged.
• China’s economic woes and geopolitical risk might keep a lid on any further gains for the cross.

The AUD/JPY cross attracts some dip-buying near the 96.25 region during the Asian session on Tuesday and jumps to a fresh daily peak after the Reserve Bank of Australia (RBA) announced its policy decision. Spot prices currently trade around the 96.70 region, though remain confined in a familiar range held over the past three days.

The Australian Dollar (AUD) strengthens a bit after the RBA, as was widely anticipated, decided to keep the Official Cash Rate (OCR) unchanged at the end of the February meeting. In the accompanying policy statement, the RBA noted that wage growth has picked up but is not expected to increase much further and remains consistent with the inflation target. Furthermore, the RBA published new economic forecasts and now sees 2024 GDP growth at 1.8% as compared to the 2% estimated previously. This, in turn, suggests that the RBA's tightening cycle is over and that the next move would be down, which might hold back bulls from placing aggressive bets around the AUD/JPY cross.

Apart from this, persistent worries about slowing economic growth in China might further contribute to keeping a lid on the China-proxy Aussie. Moreover, the risk of a further escalation of geopolitical tensions in the Middle East might continue to benefit the Japanese Yen's (JPY) relative safe-haven status and contribute to capping the AUD/JPY cross. The downside, however, seems cushioned in the wake of comments from China's sovereign wealth fund, saying that they will increase the investment of China stock ETFs and are determined to safeguard the stable operation of the market. Hence, acceptance below the 100-day SMA is needed to confirm a bearish breakdown.

Technical levels to watch

• The AUD/JPY is currently trading at 96.32, recording a loss of 0.30%.
• According to daily chart indicators, negative RSI trajectory and ascending red MACD histogram hint bearish momentum.
• Hourly chart indicators imply bearish pressure has eased with a rebound in bulls evident in positive RSI slope and flat MACD bars.

In Monday's session, the AUD/JPY pair lost ground, with a low of 96.32 following a previous high of 96.80 earlier in the day. On the fundamental side, markets await the Reserve Bank of Australia meeting on Tuesday where investors will look for clues for forward guidance which could set the pace of the cross for the week. The technical outlook for the pair remains neutral to bearish on the daily chart, although recent activity shows the bulls regaining some ground on the hourly chart.

AUD/JPY levels to watch

According to the daily chart, it is showing a neutral to bearish outlook. The negative territory and declining slope of the Relative Strength Index (RSI) indicates a bearish momentum. Simultaneously, the Moving Average Convergence Divergence (MACD) histogram showcases increasing sake of red bars which signals the short-term downward pressure. Nevertheless, despite the shorter-term momentum suggesting bearish sentiment, when looking at the Simple Moving Averages (SMAs), the pair is evidently below the 20-day SMA but bulls are presenting battle at the 100-day SMA and is still above the 200-day average. This indicates that in the larger picture, bulls maintain a stronghold.

Moving onto the shorter-term outlook given by the hourly chart, it presents a slightly different picture. On this timeframe, despite the bears taking a step back and allowing for some recovery, the bullish force is merely reflected as a retaliation rather than a comeback. The Relative Strength Index (RSI) although in negative territory, boasts a positive slope indicative of some bullish pushback. The Moving Average Convergence Divergence (MACD) echoes this sentiment with flat red bars. However, the buying momentum is not sufficient to negate the dominant selling sentiment, but it does put forth a pause in the bearish outlook of the session.

• AUD/JPY snaps its recent gains as the safe-haven Japanese Yen improves on escalated geopolitical tension.
• White House national security adviser Jake Sullivan warned that US airstrikes were just the beginning.
• Australian Dollar faces challenges as the S&P/ASX 200 Index retreats from last week's record high ahead of RBA’s interest rate decision.

AUD/JPY retraces its recent gains amid speculation of an imminent shift in the Bank of Japan's (BoJ) policy stance. Additionally, escalated geopolitical tension in the Middle East contributes to increased demand for the safe-haven Japanese Yen (JPY), acting as a headwind for the AUD/JPY cross. As a result, the cross edges lowered to around 96.60 during the Asian session on Monday.

The United States (US) and the United Kingdom (UK) conducted new air strikes on the Iran-backed Houthi militant group in Yemen on Saturday. This action was taken in response to a drone strike that resulted in the death of three US service members in Jordan. Adding to the tensions, White House national security adviser Jake Sullivan warned on Sunday that US airstrikes on Iranian-backed militias were just the beginning. Sullivan also expects the possibility of strikes on Iranian soil.

The Australian Dollar (AUD) is under selling pressure as the benchmark S&P/ASX 200 Index retreats from last week's record high. The decline is particularly pronounced in the miners and energy sectors, which is putting additional downward pressure on the AUD/JPY cross

On Monday, Australia’s Trade Balance (MoM) for January indicated a reduction, with the figure at 10,959M compared to the revised figure of 11,764M in December. Additionally, the Judo Bank Composite Purchasing Managers Index (PMI) improved to 49 in January from 48.1 prior. The Services PMI also saw an improvement, rising to 49.1 from the previous figure of 47.9.

The Reserve Bank of Australia (RBA) is scheduled to announce its interest rate decision on Tuesday. Markets expect RBA to maintain the cash rate at its current level of 4.35%. Investors will pay close attention to RBA Governor Michele Bullock's speech on the monetary policy outlook, as it could provide additional insights into the central bank's stance and considerations for future policy actions.

• The AUD/JPY registers gains at 96.60 mark, with a positive 0.40% score on the board.
• Daily indicators flattened in negative territory.
• On the weekly chart chart, bearish momentum is building.

In Friday's session, the AUD/JPY was seen rising to 96.60, recording gains of 0.40% but will still close a 0.70% weekly loss. While bears have dominated in the last sessions, pushing the pair down to its lowest level since mid-December, they seem to be taking a breather which allowed room for the upside. However, on the weekly outlook, the bearish sentiment is still evident, indicating more downside potential as the cross tallies a second consecutive weekly loss.

On the daily chart, despite the bears making some headway and the pair's trading position situated below the 20-day Simple Moving Averages (SMAs), the bulls retain control in the wider frame.. With regards to the Moving Average Convergence Divergence (MACD), the flat red bars indicate a period of consolidation, which could be seen as bears taking a breather as well as the positive slope in negative territory of the Relative Strength Index (RSI).

On the weekly chart, the momentum appears to tilt towards the bears. With the RSI falling in the positive territory and the MACD displaying red bars, it suggests that the selling momentum may be building up. Since mid-January, the cross declined by nearly 1%, and tallies a two-week losing streak.

AUD/JPY daily chart

• AUD/JPY recovers from a two-month low at 95.50 recorded on Thursday.
• A Reuters Poll expects RBA to maintain its current interest rate of 4.35% in the February meeting.
• The previous week’s foreign investment might have supported the Japanese Yen.

AUD/JPY continues to gain ground, recovering from the two-month low at 95.50 observed in the previous session. The cross trades higher around 96.80 during the European session on Friday. The Australian Dollar (AUD) has found support from an improved Australian money market, contributing to the strength of the AUD/JPY cross.

Furthermore, the better-than-expected Producer Price Index (PPI) data from Australia underpinned the Aussie Dollar, subsequently underpinning the AUD/JPY cross. The Australian Bureau of Statistics has released the PPI (YoY) for the fourth quarter, reporting an improvement with a growth rate of 4.1%, surpassing the previous growth of 3.8%.

On Thursday, a Reuters Poll showed an expectation that the Reserve Bank of Australia (RBA) could maintain the current interest rate of 4.35% in its upcoming February meeting. Furthermore, former RBA board member Warwick McKibbin suggested that the Australian cash rate may remain around 4.5% for an extended period.

The Australian Dollar has faced challenges, as bond traders have increased their expectations of early interest rate cuts by the Reserve Bank of Australia (RBA) following an unexpectedly weak quarterly inflation report. Futures markets are fully pricing in 50 basis points reductions in 2024, with the first adjustment anticipated in August.

The Bank of Japan's (BoJ) hawkish stance has provided support for the Japanese Yen (JPY). Additionally, the escalated geopolitical tensions in the Middle East might have driven the investors towards the safe-haven Japanese Yen, consequently capping the advances of the AUD/JPY cross.

The Japanese Yen might have gained support from the influx of foreign investment. For the week ending January 26, Foreign Bond Investment in Japan recorded inflows of ¥382.9 billion, a significant turnaround from the previous week's outflows of ¥43.5 billion. Additionally, Foreign Investment in Japanese Stocks rebounded during the same week, rising to ¥720.3 billion compared to the previous week's ¥287 billion.

• The AUD/JPY is experiencing a downward shift at 96.18, seeing a 0.23% loss.
• Indicators on the daily chart show a negative outlook as the cross now trades below the 20 and 100-day SMA.
• Four-hour chart indicators are consolidating after hitting oversold conditions.

On Thursday's session, the AUD/JPY experienced a downturn, hovering at 96.18 after hitting a its lowest level since mid December near 95.50. The daily chart conveys a bearish hue with the sellers gaining substantial ground. Meanwhile, the four-hour chart indicators seem to have enter in a consolidation phase, following a dip into oversold territories.

In the daily chart perspective, the leading indicators signal an inclined selling momentum. The Relative Strength Index (RSI) is charting a downward trajectory indicating bearish strength, especially within a negative zone. This is echoed by the Moving Average Convergence Divergence (MACD) which prints a surge in red bars, indicating increasing bearish pressure. Furthermore, the cross fell below the 100-day Simple Moving Average (SMA), a strong resistance which strengthens the case for the sellers .

Inspecting the shorter-term dynamics from the four-hour chart, it appears the bearish tendency seems to be leveling off. Indicators have moved to a stable phase after previously registering oversold conditions. The RSI in particular, maintains a flat formation in a negative territory, indicating a momentary pause in downward momentum. Additionally, the MACD also show flat red bars indicating growth in short-term selling pressure, though at a decreasing rate.

AUD/JPY daily chart

AUD/JPY levels to watch

• AUD/JPY drifts lower for the third straight day and seems vulnerable to sliding further.
• Softer domestic inflation lifts August RBA rate cut bets and undermines the Aussie.
• The BoJ’s hawkish tilt, along with geopolitics, benefits the JPY and exerts pressure.

The AUD/JPY cross remains under some selling pressure for the third straight day on Thursday and drops to a nearly one-month low, during the Asian session. Spot prices currently trade around the 96.20-96.15 area, with bears now looking to extend the downward trajectory further below the 100-day Simple Moving Average (SMA).

The Australian Dollar (AUD) continues to be undermined by softer domestic consumer inflation figures released on Wednesday, which reaffirmed expectations that the Reserve Bank of Australia's (RBA) tightening cycle is over. In contrast, the Bank of Japan (BoJ) last week signalled that conditions for phasing out huge stimulus and pulling short-term rates out of negative territory were falling into place. This, along with the risk of a major escalation of geopolitical tensions in the Middle East, turns out to be a key factor behind the safe-haven Japanese Yen's (JPY) relative outperformance and exerts downward pressure on the AUD/JPY cross.

Bulls, meanwhile, seem rather unimpressed by a private-sector survey, which showed that China's factory activity expanded at a steady pace for the third straight month in January. In fact, China's Caixin Manufacturing PMI remains unchanged at 50.8 in January as compared to market expectations for a downtick to 50.6. This, however, does little to benefit the China-proxy Aussie. Apart from this, weakness below the 100-day SMA suggests that the path of least resistance for the AUD/JPY cross is to the downside. Hence, a subsequent decline back towards retesting the YTD trough, around the 95.85 region, now looks like a distinct possibility.

Technical levels to watch

• AUD/JPY making a decisive downshift with a 0.95% drop, currently stationed at 96.50.
• As the bears push the cross below the 20-day SMA, the outlook turned negative for the cross.
• Despite recent bearish activities, pair remains above both 100 & 200-day SMAs, signalling an overall bullish trend.

In Wednesday's trading session, the AUD/JPY fell to 96.50 after a strong 0.95% decline. The daily chart outlook for the pair appears neutral to bearish, indicative of bears gaining ground. Reinforcing this sentiment, the four-hour chart also leaned towards the bearish side with indicators near the oversold zone.

The daily Relative Strength Index (RSI) shows a downward inclination yet remaining in the positive region, indicating slight selling pressure as well as the rising red bars of the Moving Average Convergence Divergence (MACD). Furthermore, the bears have made an apparent show of power, pushing the cross price below its 20-day Simple Moving Averages (SMA). However, the AUD/JPY remains firm on higher ground, as demonstrated by its position above both the 100 and 200-day SMAs. This solidifies the notion that despite recent bearish challenges, the overall buying force still commands the roost.

Switching to a shorter time frame, the four-hour outlook seems to be also favoring a bearish narrative for the moment. Technical indicators appear oversold, reflecting a growing bearish bias among traders. Simultaneously, the Relative Strength Index (RSI) is on the cusp of the oversold threshold, while the Moving Average Convergence Divergence (MACD) exhibits rising red bars, another pointer to the growing clout of bears in the short-term.

AUD/JPY daily chart

AUD/JPY levels to watch

• AUD/JPY could move downward toward the 23.6% Fibonacci retracement at 96.85.
• The lagging indicator MACD suggests a tepid momentum for the cross.
• A collapse below the 50-day EMA could lead the cross to approach the support zone near the 38.2% Fibonacci retracement at the 96.26 level.

AUD/JPY moves in a downward direction for the second successive day, trading lower around 97.00 during the Asian session on Wednesday. The Australian Dollar (AUD) faces a challenge after the softer consumer inflation data released earlier in the day.

The immediate support appears at 23.6% Fibonacci retracement at 96.85 lined up with the 50-day Exponential Moving Average (EMA) at 96.83. A firm break below the 50-day EMA could put downward pressure on the AUD/JPY cross to approach the major support at the 96.50 level followed by the 38.2% Fibonacci retracement at the 96.26 level.

The technical analysis of the AUD/JPY cross involves examining various indicators. The 14-day Relative Strength Index (RSI), a lagging indicator, is below the 50 level, suggesting a selling pressure and a bearish momentum for the pair.

On the other hand, the Moving Average Convergence Divergence (MACD) for the pair shows tepid momentum in the market. The MACD line is positioned above the centerline but below the signal line. Traders could await confirmation from the MACD indicator before determining the direction of the AUD/JPY cross.

On the upside, the AUD/JPY cross could find the key barrier at 97.50 followed by the weekly high at 97.69. A breakthrough above the latter could prompt the upward sentiment and lead the pair to test the monthly high at 97.88 and the psychological resistance at 98.00 level.

AUD/JPY: Daily Chart