The AUD/JPY pair continues its downward trajectory during Friday’s Asian session, driven by Yen strength stemming from expectations of a potential interest rate hike by the Bank of Japan (BoJ). The pair remains under pressure despite the Reserve Bank of Australia‘s (RBA) hawkish stance, with Australian PMI data providing mixed signals.
Key Drivers: Japanese Yen (JPY)
BoJ Rate Hike Speculation
A Reuters survey indicates that 56% of economists expect the BoJ to raise interest rates in December, with 90% projecting rates to reach 0.50% by March 2025.
Governor Kazuo Ueda highlighted the importance of addressing Yen depreciation’s economic impact, keeping the possibility of further hikes open.
Economic Data Insights
Japan CPI: The National CPI eased to 2.3% YoY in October, a nine-month low, but core CPI remained slightly above forecasts at 2.3%, highlighting persistent inflationary pressures.
PMI Data:
Services PMI improved to 50.2 in November (from 49.7), moving into expansion territory.
Manufacturing PMI unexpectedly fell to 49.0 (from 49.2), the lowest since March, missing expectations of 49.5.
Political Developments
Prime Minister Shigeru Ishiba is considering a $90 billion stimulus package to mitigate rising prices, potentially supporting the Japanese economy.
Key Drivers: Australian Dollar (AUD)
Australian PMI Data
Manufacturing PMI: Improved to 49.4 in November from 47.3 in October, signaling a slower contraction.
Services PMI: Dropped to 49.6 from 51.0, marking the first contraction in services activity in ten months.
RBA’s Hawkish Stance
Despite the weak PMI figures, the RBA’s outlook on future interest rate increases continues to provide some underlying support for the AUD.
Technical Analysis: AUD/JPY
Current Levels:
Support: Immediate support lies near 100.00, followed by the 99.50 region, representing key psychological and technical zones.
Resistance: On the upside, resistance is seen around 100.75, with stronger barriers at 101.50.
Indicators:
Momentum: The pair remains bearish in the short term, with the Relative Strength Index (RSI) trending lower.
Moving Averages: AUD/JPY is trading below its 50-day and 100-day Simple Moving Averages (SMAs), reinforcing a negative outlook.
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