AUD/JPY advances to weekly high, retakes 96.00 after Aussie/Chinese trade balance data

• AUD/JPY attracts buyers for the third straight day amid a combination of supporting factors.
• Mixed BoJ rate hike cues and fresh trade concerns undermine the JPY amid a positive risk tone.
• The upbeat Aussie trade balance data and easing US-China tensions further benefit the Aussie.

The AUD/JPY cross extends its weekly uptrend from a one-month trough - levels just below the 95.00 psychological mark - and attracts buyers for the third successive day on Thursday. The momentum lifts spot prices to a fresh weekly low during the Asian session, with bulls looking to build on the momentum beyond the 96.00 round figure.

The Japanese Yen (JPY) weakens across the board in reaction to reports that US President Donald Trump could impose an extra 15% tariff on all imports from Japan. This comes on top of the uncertainty surrounding the likely timing of the next interest rate hike by the Bank of Japan (BoJ), which, along with a positive risk tone, undermines the safe-haven JPY and acts as a tailwind for the AUD/JPY cross.

The Australian Dollar (AUD), on the other hand, benefits from the upbeat domestic data, showing that trade surplus reached a surprising $5.37 billion in June, or the highest since March, compared to the $1.6 billion surplus in the prior month. The rise was primarily led by a 6.0% MoM rise in exports, to a 16-month high, which helped offset a 3.1% drop in imports from a record high recorded in May.

The AUD bulls, meanwhile, seem unaffected by rather unimpressive trade data from China, which showed that surplus shrank more than anticipated in July amid an unexpected surge in imports. Nevertheless, the data pointed to rebounding domestic demand amid signs of easing US-China trade tensions, which, in turn, benefits the China-proxy Aussie and further lends support to the AUD/JPY cross.

It, however, remains to be seen if bulls are able to retain control amid the divergent BoJ-Reserve Bank of Australia (RBA) policy expectations. The Japanese central bank last week left the door open for an imminent rate hike by the end of this year. The RBA, on the other hand, is widely expected to lower borrowing costs at its upcoming meeting next week. This warrants caution before positioning for further gains.