AUD/JPY jumps to multi-week top after Australian CPI, remains below 96.00 mark

• AUD/JPY gains strong positive traction on Wednesday and rallies to over a three-week high.
• The Australian CPI lifts bets for a 25 bps RBA rate hike in November and boosts the AUD.
• A positive risk tone undermines the safe-haven JPY and contributes to the strong move up.

The AUD/JPY cross catches aggressive bids during the Asian session on Wednesday and spikes to the 95.90 region, or over a three-week high following the release of Australian consumer inflation figures.

Data from the Australian Bureau of Statistics (ABS) showed that the Consumer Price Index (CPI) inflation grew 1.2% in the third quarter from the prior quarter and the yearly rate decelerated from 6% to 5.4% during the July-September period. The readings, however, were slightly higher than consensus estimates and lifted market bets for a 25 bps lift-off by the Reserve Bank of Australia (RBA) at its next policy meeting on November 7. This, in turn, provides a strong boost to the Australian Dollar (AUD) and the AUD/JPY cross.

Apart from this, a generally positive risk tone is seen undermining the safe-haven Japanese Yen (JPY) and turns out to be another factor acting as a tailwind for the cross. That said, speculations that Japanese authorities will intervene in the FX market to combat a sustained depreciation in the JPY might hold back traders from placing aggressive bullish bets and act as a headwind for the AUD/JPY cross. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.

Even from a technical perspective, an intraday move above the 95.65 supply zone favours bullish traders. That said, it will still be prudent to wait for some follow-through buying beyond the 96.00 round figure before positioning for any further appreciating move. The AUD/JPY cross might then accelerate the momentum further towards the September monthly swing high, around the 96.90 region.  Traders now look to the release of the Tokyo Core CPI on Friday for some meaningful impetus.

Technical levels to watch