AUD/JPY slumps 60 pips on disappointing Australia inflation, BOJ’s Ueda eyed

• AUD/JPY stands on slippery grounds after Australia Monthly Consumer Price Index disappoints.
• Aussie inflation gauge drops below market forecasts and prior to 5.6% YoY for May.
• Market’s cautious mood, retreat in yields also weigh on risk-barometer pair.

AUD/JPY nosedives 60 pips as it justifies downbeat Australia data to recall bears amid early Wednesday, down 1.0% near 95.30 by the press time. Apart from Australia inflation, the risk-negative headlines surrounding China and a pullback in the yields also weigh on the cross-currency pair.

Australia’s Monthly Consumer Price Index (CPI) for May drops to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD).

Also read: Breaking: Australian CPI rises 5.6% YoY in May vs. 6.1% expected

Additionally, the fresh fears surrounding the US-China tension and cautious mood ahead of the top-tier central bankers’ speeches the at ECB forum, as well as expectations of the Bank of Japan’s (BoJ) market intervention also weigh on the AUD/JPY pair.

US President Joe Biden said late Tuesday that China has enormous problems. His comments were joined by the Wall Street Journal (WSJ) news saying, “The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of US rivals, according to people familiar with the situation.”

Amid these plays, S&P500 Futures print mild losses despite the upbeat performance of Wall Street whereas the US Treasury bond yields grind lower.

Having witnessed the initial market reaction to the Aussie inflation numbers, AUD/JPY pair traders may concentrate on the risk catalysts for clear directions. Also important will be Bank of Japan (BoJ) Governor Kazuo Ueda’s speech at the European Central Bank (ECB) Forum in Sintra.

Technical analysis

AUD/JPY pair’s U-turn from a one-week-old descending resistance line and the 10-DMA, respectively near 96.25 and 96.40, directs the bears toward the previous weekly low of around 95.25.