AUD/JPY falls to near a major level amid alleged intervention by Japanese authorities

• AUD/JPY depreciated as JPY continued to gain ground amid possible market intervention by Japanese authorities.
• Japan’s vice finance minister for international affairs, Masato Kanda, declined to comment on whether Japan had intervened in the market.
• Australian Composite PMI declined in April, indicating a slower pace of growth in private sector output.

AUD/JPY declined as the Japanese Yen (JPY) strengthened on Friday, following a rally on Thursday attributed to potential Japanese government intervention, marking the second such incident this week, according to a Reuters report. Masato Kanda, Japan’s vice finance minister for international affairs, declined to comment on whether Japan had intervened in the market. It is worth noting that Japanese banks will be closed due to Greenery Day on Friday.

On Thursday, the Bank of Japan (BoJ) released Minutes from the March meeting with insights into the monetary policy outlook. One member noted that the economy’s reaction to a short-term rate increase to approximately 0.1% is expected to be minimal. Additionally, several members expressed the opinion that market forces should primarily determine long-term rates.

The Australian Dollar (AUD) may strengthen due to the hawkish sentiment surrounding the Reserve Bank of Australia (RBA). It is widely anticipated that the RBA will maintain its key policy rate at 4.35% for a fourth consecutive meeting on Tuesday, and likely until the end of September, according to a Reuters poll of economists. These economists forecast only one interest rate cut this year. This shift in expectations, from two 25 basis point cuts in an April survey, follows news that inflation declined less than expected in the last quarter and the labor market remains tight.

Daily Digest Market Movers: AUD/JPY depreciates after softer Aussie PMI data

• The Judo Bank Australia Composite Purchasing Managers Index (PMI) fell to 53.0 in April from 53.3 prior. The Australian private sector output grew slightly slower. Business activity growth was primarily limited to the service sector as manufacturing output continued to decline. The Services PMI fell to 53.6 from 54.4 in the previous month.
• The ASX 200 Index advanced on Friday, marking its second consecutive session of gains. The rise followed positive movements on Wall Street overnight, driven by reassurances from the US Federal Reserve that dismissed concerns about another interest rate hike.
• On Thursday, Australia’s Trade Balance (MoM) showed a surplus but lower than the market expectations in April. Additionally, the Building Permits showed the number of permits for new construction projects rose but fell short of the expectations in March.
• The Consumer Confidence Index fell to 38.3 in April from 39.5 in March and came below the market expectations of 39.7. This decline marks the lowest level in three months, reflecting weakened sentiment among households.
• According to Reuters, the Sankei newspaper reported on Tuesday that Japan is considering implementing tax breaks for repatriation of corporate profits into the Yen. This measure may potentially be included in the annual mid-year policy blueprint.

Technical Analysis: AUD/JPY falls to near 100.50, aligned with channel’s lower boundary

The AUD/JPY trades around 100.50 on Friday, testing to break below the lower boundary of the ascending channel. However, the 14-day Relative Strength Index (RSI) is positioned above the 50 level. A further decline could commence the weakening of the bullish bias.

A break below the lower boundary of the ascending channel could lead the AUD/JPY cross to navigate the region around the psychological level of 100.00. A further decline could strengthen the bearish bias and put pressure on the currency cross to reach April’s low at 97.78.

The key resistance is observed at the lower boundary of the wedge around the psychological level of 103.80. A rebound back into the ascending wedge could potentially strengthen the bullish bias and push the AUD/JPY cross toward the psychological level of 105.00, followed by the upper boundary of the wedge.

AUD/JPY: Daily Chart