AUD/JPY declines toward 98.00 amid RBA dovish outlook and strong Yen
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The AUD/JPY cross fell to near 98.00 during early European trading hours on Thursday, pressured by mixed economic data from Australia and deflationary risks in China. Meanwhile, the Japanese Yen gained strength following robust wage growth figures, adding further downward momentum to the pair.
Key drivers of AUD/JPY decline
Australia's mixed economic data
Australia's headline inflation edged higher to 2.3% in November from 2.1%, while core inflation eased to 3.2% from 3.5%.
Retail sales rose 0.8% MoM in November, up from 0.5% in October, but missed market expectations of a 1.0% increase.
Australia’s trade surplus expanded to 7,079 million, surpassing expectations, with exports up 4.8% MoM and imports rising 1.7% MoM.
These data points align with the Reserve Bank of Australia’s (RBA) growing confidence that inflation is on track to return to its 2-3% target range, raising speculation about potential rate cuts in the coming months.
China's deflationary concerns
China’s CPI inflation rose by just 0.1% YoY in December, down from 0.2% in November, highlighting increasing deflationary risks.
The lack of growth in Chinese inflation signals weak domestic demand, which could weigh on Australian exports given the close trade ties between the two nations.
Strength in the Japanese Yen
The Japanese Yen strengthened on the back of robust Labor Cash Earnings, which increased by 3.0% YoY in November, exceeding expectations of a 2.7% rise.
However, Real Wages declined by 0.3% YoY, marking the fourth consecutive month of negative real wage growth.
While these figures provide mixed signals, the consistent drop in real wages has cast doubts on the likelihood of interest rate hikes by the Bank of Japan (BoJ), keeping overall sentiment dovish.
Technical outlook for AUD/JPY
The AUD/JPY pair faces immediate support around the 98.00 level. A break below this could open the door to further declines toward 97.50.
Resistance is seen near 98.50, and a sustained break above this level would be needed to signal a recovery.
Outlook for AUD/JPY
The pair remains vulnerable as the Australian Dollar struggles with weak domestic and Chinese data, while the Yen benefits from strong wage growth and cautious BoJ expectations.
Investors will closely monitor developments in Australia’s economic trajectory and shifts in global sentiment for clearer directional cues.
Conclusion
AUD/JPY faces challenges as dovish RBA sentiment, coupled with China’s deflationary risks, weigh on the Aussie Dollar. At the same time, the Japanese Yen finds support from domestic wage growth. Traders should watch for further data releases and central bank commentary to assess the pair’s next move.
Key drivers of AUD/JPY decline
Australia's mixed economic data
Australia's headline inflation edged higher to 2.3% in November from 2.1%, while core inflation eased to 3.2% from 3.5%.
Retail sales rose 0.8% MoM in November, up from 0.5% in October, but missed market expectations of a 1.0% increase.
Australia’s trade surplus expanded to 7,079 million, surpassing expectations, with exports up 4.8% MoM and imports rising 1.7% MoM.
These data points align with the Reserve Bank of Australia’s (RBA) growing confidence that inflation is on track to return to its 2-3% target range, raising speculation about potential rate cuts in the coming months.
China's deflationary concerns
China’s CPI inflation rose by just 0.1% YoY in December, down from 0.2% in November, highlighting increasing deflationary risks.
The lack of growth in Chinese inflation signals weak domestic demand, which could weigh on Australian exports given the close trade ties between the two nations.
Strength in the Japanese Yen
The Japanese Yen strengthened on the back of robust Labor Cash Earnings, which increased by 3.0% YoY in November, exceeding expectations of a 2.7% rise.
However, Real Wages declined by 0.3% YoY, marking the fourth consecutive month of negative real wage growth.
While these figures provide mixed signals, the consistent drop in real wages has cast doubts on the likelihood of interest rate hikes by the Bank of Japan (BoJ), keeping overall sentiment dovish.
Technical outlook for AUD/JPY
The AUD/JPY pair faces immediate support around the 98.00 level. A break below this could open the door to further declines toward 97.50.
Resistance is seen near 98.50, and a sustained break above this level would be needed to signal a recovery.
Outlook for AUD/JPY
The pair remains vulnerable as the Australian Dollar struggles with weak domestic and Chinese data, while the Yen benefits from strong wage growth and cautious BoJ expectations.
Investors will closely monitor developments in Australia’s economic trajectory and shifts in global sentiment for clearer directional cues.
Conclusion
AUD/JPY faces challenges as dovish RBA sentiment, coupled with China’s deflationary risks, weigh on the Aussie Dollar. At the same time, the Japanese Yen finds support from domestic wage growth. Traders should watch for further data releases and central bank commentary to assess the pair’s next move.