AUD/JPY declines after facing barricades around 95.00, Tokyo CPI in focus

• AUD/JPY is facing barricades around 94.80 for the entire week.
• Higher interest rates by the RBA have resulted in a contraction in economic activities.
• The BOJ will stick to its prudent monetary policy even if inflation hits 3%

The AUD/JPY pair is continuously struggling to surpass the immediate hurdle of 94.80 for the entire week. The risk barometer is displaying topsy-turvy moves in a 94.10-94.83 range and a potential trigger is required for a decisive movement. This week, the release of the Purchasing Managers Index (PMI) numbers by Australia and Japan has failed to bring a significant impact on the asset.

The Australian Manufacturing PMI slipped sharply to 54.5 vs. expectations of 57.3 and the prior release of 55.7. Also, the Services PMI data landed lower to 49.6 against the forecasts of 54 and the former figure of 50.9. Not only the Australian economy has recorded a downward shift in the PMI data, other Western leaders have also displayed a vulnerable performance.

As price pressures are not displaying signs of exhaustion and the central banks are hiking their interest rates vigorously to contain the former, the private sector is becoming the major victim of the entire process. The unavailability of cheap money is forcing them to have caution while picking the investment opportunities and executing the expansion plans. This has led to a serious contraction in economic activities.

On the Tokyo front, the cross wires from Bloomberg are announcing that the Bank of Japan (BOJ) will stick to its prudent monetary policy even if inflation hits 3% after a survey. The economists believe that the rising price rise index is not the sole purpose for shifting to a neutral stance. Japan’s economy is also facing the headwinds of lower paychecks to the households. So continuous higher labor cost index along with price pressures for a decent period is required to shift the BOJ’s stance.

Going forward, investors' focus will remain on the Tokyo Consumer Price Index (CPI), which will release on Friday. The plain-vanilla and core CPI are expected to remain steady at 2.5% and 1.5% respectively.