AUD/JPY holds steady near two-week peak, reacts little to stronger Australian Retail Sales

• AUD/JPY gains some traction for the second straight day and climbs to a nearly two-week top.
• China's new measures and the upbeat Australian Retail Sales continue to underpin the Aussie.
• The BoJ's dovish stance weighs on the JPY and supports prospects for further near-term gains.

The AUD/JPY cross scales higher for the second successive day on Monday and touches a nearly two-week high, around the 94.30-94.35 region during the Asian session. Spot prices, meanwhile, stick to intraday gains and react little to the better-than-expected Australian macro data.

In fact, the Australian Bureau of Statistics (ABS) reported that Retail Sales – a measure of the country’s consumer spending – rose 0.5% in July against market expectations for a 0.3% increase and the 0.8% decline registered in the previous month. The backwards-looking data does little to provide any meaningful impetus, though new measures announced by China continue to lend support to antipodean currencies, including the Australian Dollar (AUD). Apart from this, the offered tone surrounding the Japanese Yen (JPY) turns out to be another factor pushing the AUD/JPY cross higher.

It is worth recalling that China on Sunday announced a reduction in the stamp duty on stock trading to boost the struggling market and revive investor confidence. The finance ministry said in a brief statement that the levy charged on stock trades will drop from 0.1% to 0.05% as of August 28, marking the first reduction since 2008. This, in turn, triggers a risk-on rally, which, along with a more dovish stance adopted by the Bank of Japan (BoJ), is seen undermining the safe-haven Japanese Yen (JPY) and contributing to the strong intraday bid tone surrounding the AUD/JPY cross.

In fact, BoJ Governor Kazuo Ueda on Sunday, speaking at the Jackson Hole Symposium, said that the underlying inflation in Japan remains a bit below the 2% target and the central bank will stick to current ultra-easy monetary policy settings. This comes after data released on Friday showed that consumer prices in Tokyo – Japan's capital city – grew at a slower-than-expected pace in August and pretty much ensured that the BoJ may keep the status quo until next summer. That said, concerns about the worsening economic conditions might cap gains for the AUD/JPY cross.

Apart from this, expectations for another on-hold rate decision by the Reserve Bank of Australia (RBA) in September warrants some caution before positioning for any further apprecaiting move. From a technical perspective, meanwhile, the recent bounce from the 100-day Simple Moving Average (SMA) and the subsequent move up favours bulls amid a big divergence in the policy stance adopted by the BoJ and other major central banks. Hence, some follow-through strength towards the next relevant hurdle, ahead of the 95.00 psychological mark, looks like a distinct possibility.

Technical levels to watch