AUD/JPY recovers from fortnight low towards 96.00 on upbeat Aussie Retail Sales, firmer yields

• AUD/JPY picks up bids to refresh intraday high after strong Aussie data.
• Australia Retail Sales jumped past market forecast, prior readings to 0.7% MoM in May.
• Japan’s upbeat Retail Trade for May fail to gain major attention as yields rebound, sentiment improves.
• Second-tier Japan data, risk catalysts eyed for clear directions.

AUD/JPY justifies strong Australia Retail Sales figures while refreshing intraday high near 95.60 during the mid-Asian session on Thursday. In doing so, the cross-currency pair ignores upbeat Japan Retail Trade numbers amid firmer yields and cautious optimism in the markets.

That said, Australia’s seasonally adjusted Retail Sales grew 0.7% monthly in May versus 0.1% expected and 0.0% prior, per the latest economic update from the Australian Bureau of Statistics (ABS). "Sales of A$35.52 billion ($23.52 billion) were up 4.2% from a year earlier, matching April's growth but a world away from post-lockdown boom levels of 19% seen in the middle of last year," said Reuters after the data release.

The upbeat Aussie Retail Sales allowed the AUD/JPY pair to consolidate the previous day’s heavy losses marked after Australia’s inflation data disappointed. On Wednesday, Australia’s Monthly Consumer Price Index (CPI) for May dropped to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplified 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).

On the other hand, Japan’s Retail Trade growth jumps to 5.7% YoY for May versus 5.4% expected and 5.1% prior (revised) whereas the seasonally adjusted figures reversed the previous contraction of 1.2% with 1.3% gain in the key statistics for the said month, versus -0.2% market forecasts.

Apart from the Aussie data, Bank of Japan (BoJ) Governor Kazuo Ueda’s defense of easy-money policy also seemed to have propelled the AUD/JPY pair prices. Bank of Japan (BoJ) Governor Kazuo Ueda defended the dovish bias among the Japanese central bank policymakers while saying, “(There is) still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth.” BoJ Governor Ueda also added that Japanese economy is going to expand slightly above potential for some time.

It’s worth noting that US Treasury Secretary Janet Yellen’s ‘hopes’ of visiting China to re-establish contracts seem to recently favoring the market sentiment. Also, the central bankers didn’t say anything news and hence traders also get chance to consolidate the previous day’s moves and propel the AUD/JPY pair.

Amid these plays, US Treasury bond yields recover while S&P500 Futures print mild gains by the press time.

Looking ahead, Japan’s Consumer Confidence for June, expected 36.2 versus 36.0 prior, will direct immediate AUD/JPY moves but major attention will be given to the yields and the risk catalysts for a clear guide.

Technical analysis

Despite the latest corrective bounce off weekly support line, around 95.10 by the press time, AUD/JPY buyers need validation from the 10-DMA hurdle of around 96.30 to retake control.