AUD/JPY declines towards 94.00 on positive PMI data, RBA in focus

• AUD/JPY is scaling lower towards 94.00 as the release of the PMI data advocated long-liquidations.
• The anxiety over the interest rate decision by the RBA has inserted volatility into the counter.
• A rate hike by 25 bps is expected from the RBA next week.

The AUD/JPY pair has witnessed selling pressure after failing to sustain above 94.50 in the Asian session. A two-week vertical run-up is finding some offers as profit-booking has kicked in on upbeat Jibun Bank Services PMI. The IHS Markit has reported the Services PMI at 52.6, higher than the former figure of 51.7.

Also, the agency has reported the aussie Composite PMI and Services PMI. The Composite PMI has landed at 52.9 vs. the prior print of 52.6. Also, the Services PMI has improved to 53.2, higher than the estimates and the prior print of 53.

The risk barometer is not facing any fundamental damage therefore a mild correction in the asset won’t affect the bullish bias. However, anxiety over the monetary policy announcement by the Reserve Bank of Australia (RBA) next week could drag the asset lower.

The market participants are expecting one more rate hike announcement by RBA Governor Philip Lowe. Investors should be aware of the fact that the RBA raised its interest rate by 25 basis points (bps) last month. Soaring inflation is impacting the real income of the households. A Reuters poll of economists found that the Reserve Bank of Australia will raise rates by a modest 25 bps for a second straight meeting in June. It looks like The RBA may prefer a gradual path of pushing lower rates to the neutral figure rather than opting for an aggressive one.