AUD/JPY drops below 94.00 despite firmer yields, Australia jobs report, Japan intervention eyed

• AUD/JPY takes offers to refresh daily low, extends previous day’s pullback form a two-week high.
• Yields refresh multi-year high as inflation data renew recession woes.
• Japan’s verbal intervention lures JPY bulls of late but actual action is necessary to avoid risk of a slump.
• Australia jobs report may offer intermediate relief to buyers.

AUD/JPY renews its intraday low around 93.90 while extending the previous day’s losses during early Thursday in Asia. In doing so, the cross-currency pair portrays the market’s cautious mood and the pair trader’s anxiety ahead of Australia’s monthly employment report, not to forget the People’s Bank of China’s (PBOC) monetary policy meeting.

It’s worth noting that the return of the risk-off mood on Wednesday joined the Japanese policymakers’ verbal attack on the drastic fall of the yen to weigh on the AUD/JPY prices. Also favoring the first fall in three days were headlines suggesting a push to the Bank of Japan (BOJ) towards policy change and lesser odds favoring the Reserve Bank of Australia (RBA). In doing so, the cross-currency pair ignored the bond market rout.

The US 10-year Treasury yields refreshed a 14-year high above 4.0% as market players rushed towards the risk-safety after UK-inspired risk-on mood faded after the strong inflation in the leading economies renewed fears of recession amid the central bankers’ aggressive stands despite economic slowdown fears. The price pressures in Britain, Eurozone and Canada were mostly nearly multi-month high and the core numbers, as well as services inflation, were firmer enough to push the central banks towards higher rates.

Adding to the risk-off mood, and weighing on AUD/JPY prices, were news surrounding China. The dragon nation registered four-month high covid numbers while the US readiness to tie up with Taiwan to co-produce American weapons, per Nikkei, adds to the Sino-American tussles. Given the Aussie ties with Beijing, any negatives from the world’s second-largest economy weigh on Australia.

Amid these plays, Wall Street closed negative for the first time in three days while the S&P 500 Futures also print mild losses by the press time.

Moving on, Aussie jobs report and PBOC will be important to watch together with a likely market meddling of Japan to defend the yen. Australia's Employment Change is likely to print a 25K figure versus 33.5K prior but the Unemployment Rate remains steady at 3.5%. Further, the PBOC is likely to keep its current monetary policy unchanged with the benchmark rate at 3.65%.

To sum up, AUD/JPY may witness a short-term relief on firmer data but Japan’s intervention and sour sentiment can weigh on prices.

Also read: Australian Employment Preview: Near-term relief to the long-lasting pain

Technical analysis

AUD/JPY remains indecisive unless trading between 50-DMA and weekly support line, respectively around 94.60 and 93.60.