AUD/JPY extends winning streak on upbeat Australian CPI data

• AUD/JPY gains ground due to the stronger-than-expected Australian consumer inflation data.
• The ASX 200 Index experienced an uptick, primarily fueled by advancements in technology and healthcare stocks, mirroring the positive trajectory witnessed on Wall Street.
• The Japanese Yen faces challenges as the yield gap widens between Japan and other major countries.

AUD/JPY extends its winning streak for the third successive day after paring intraday losses on Wednesday. Additionally, the Australian Bureau of Statistics (ABS) released the better-than-expected Consumer Price Index (CPI) data on Wednesday, guiding the outlook for the Reserve Bank of Australia's (RBA) monetary policy. This has bolstered the Australian Dollar (AUD), consequently, underpinning the AUD/JPY cross.

The Australian Dollar (AUD) receives upward support due to the improved risk appetite, along with the higher ASX 200 Index, particularly driven by gains in technology and healthcare stocks. Australian shares followed the positive trend seen on Wall Street, buoyed by robust corporate earnings reports, which have lifted market sentiment. Additionally, diminishing tensions in the Middle East have contributed to a positive market atmosphere.

The Japanese Yen (JPY) encounters difficulties due to the widening yield gap between Japan and numerous other major countries, leading traders to borrow JPY and seek higher yields in other assets. Despite this trend, intervention by Japanese authorities to buy Yen has not yet occurred. With the Bank of Japan (BoJ) commencing its two-day policy meeting on Thursday, Tokyo may refrain from intervening in the currency market until at least next week.

Daily Digest Market Movers: AUD/JPY appreciates on stronger CPI, risk-on mood

• Australia's Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecasted 3.4% for Q1 and 4.1% prior.
• Australia's Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.
• On Tuesday, Australia's Judo Bank Composite Purchasing Managers Index (PMI) showed a surge to a 24-month high of 53.6 in April, marking an improvement from the previous month's 53.3. Manufacturing PMI rose to an eight-month high of 49.9 in April, compared to March's 47.3. Services PMI declined to a 2-month low of 54.2 compared to the previous reading of 54.4.
• Japan's Jibun Bank Manufacturing PMI improved to 49.9 in April as data showed on Tuesday, compared to the expected reading of 48.0 and 48.2 prior. Meanwhile, Services PMI rose to 54.6 from the previous reading of 54.1.
• Reuters reported that Bank of Japan (BoJ) Governor Kazuo Ueda reiterated on Tuesday that the central bank would raise interest rates again if trend inflation accelerates toward its 2% target, in line with its forecast. Ueda also said that it is hard to predict in advance the ideal timeframe for the Bank of Japan (BoJ) to gather sufficient data before considering a policy change.
• Japan's Finance Minister Shunichi Suzuki stated on Tuesday that last week's trilateral meeting with his counterparts from the US and South Korea likely established a foundation for Tokyo to undertake necessary measures in the foreign exchange market, according to a Reuters report.
• The China Securities Journal reported on Tuesday that the People's Bank of China (PBoC) will decrease the Medium-term Lending Facility (MLF) rate, aiming to lower funding costs. The next MLF rate setting is scheduled for May 15. This decision could potentially influence the Australian market, given the close trade relationship between the two countries.

Technical Analysis: AUD/JPY rises to the psychological level of 101.00

The AUD/JPY trades around 100.90 on Wednesday. The currency cross moves above April's high of 100.81. The daily ascending channel, coupled with the 14-day Relative Strength Index (RSI) reacting above the 50 level, indicates a strengthening bullish sentiment. The immediate barrier appears at the psychological level of 101.00. A breakthrough above this level could prompt the AUD/JPY cross to test the upper boundary of the ascending channel at 101.50.

On the downside, the AUD/JPY cross could find key support at the major level of 100.50. A break below this level could lead the currency cross to the support level of 99.65, followed by the lower boundary of the ascending channel around the level of 99.00.

AUD/JPY: Daily Chart