AUD/JPY justifies risk-barometer status around 91.00, Japan holiday, Aussie data probe bulls

• AUD/JPY clings to mild gains around three-week high.
• Australia Building Permits slumped in November, Tokyo markets are off for Coming-of-Age Day.
• China-linked headlines propel risk-on mood amid a sluggish start to the key week.
• Inflation numbers from US, China and Japan appears crucial for clear directions.

AUD/JPY seesaws around the highest levels in three weeks as it makes rounds to 91.00 during Monday’s sluggish Asian session.

In doing so, the cross-currency pair takes clues from the markets’ risk-on mood to grind higher. However, a holiday in Japan joins downbeat Aussie data and hawkish concerns from the Bank of Japan (BOJ) to challenge the AUD/JPY bulls.

That said, Australia’s Building Permits dropped to -15.1% YoY in November versus -6.4% prior. Further details suggest that the MoM prints also declined to -9.0% from -5.6% prior (revised from -6.0%), as well as the -1.0% market forecasts.

On the other hand, comments from Japanese Prime Minister (PM) Fumio Kishida also seem to probe the AUD/JPY pair’s upside momentum. “While communicating closely with markets, the BOJ needs to make its policy more flexible with an eye on an eventual normalization of monetary policy,” said Japan PM Kishida.

The market’s risk profile remains firmer as China reopens national borders after a three-year pause. On the same line could be the early signals suggesting China’s heavy shopping during the festive season, as well as comments from People’s Bank of China (PBOC) Official suggesting optimism surrounding China’s growth conditions.

It should be noted that Friday’s downbeat prints of US wage growth, ISM Services PMI and Factory Orders also add strength to the risk-on mood and help the AUD/JPY price to remain firmer.

Amid these plays, Wall Street closed positive while the US 10-year Treasury yields dropped 16 basis points (bps) to 3.56%, the lowest levels in three weeks. It’s worth noting that the S&P 500 Futures print 0.20% intraday gains by the press time.

Looking forward, inflation data from Tokyo, China and the US will be important for the AUD/JPY pair traders to watch for clear directions as upbeat sentiment jostles with hawkish bets on the Bank of Japan (BOJ).

Technical analysis

Although the resistance-turned-support line defends AUD/JPY bulls around 89.80, a two-month-old descending trend line near 93.00 challenges the upside momentum.