AUD/JPY remains tepid amid possible intervention by Japanese authorities

The Australian Dollar loses ground after the release of lower-than-expected Retail Sales.
The Australian Retail Sales for March took an unexpected downturn, contrasting with the anticipated rise.
Market participants will closely monitor for any potential Japanese intervention on Tuesday.

AUD/JPY edges lower on Tuesday after the release of the lower-than-expected Aussie Retail Sales, a leading indicator that has a direct correlation with inflation and growth prospects, could impact the RBA’s hawkish stance on interest rate trajectory. However, the Australian Dollar (AUD) strengthened as higher-than-expected domestic inflation data raised expectations that the Reserve Bank of Australia (RBA) may not cut interest rates soon.

Australia's largest mortgage lender, Commonwealth Bank, has adjusted its forecast for the timing of the first interest rate cut by the Reserve Bank of Australia (RBA). They are now projecting only one cut in November, as reported by the Financial Review. CBA anticipates that the RBA could decrease the cash rate to 4.1% from 4.35% this year, with a more substantial drop to 3.1% by 2025. Gareth Aird, CBA's head of Australian economics, stated, "We have penciled in one 25 basis point rate cut in each quarter over 2025."

On the Japanese side, market participants will remain vigilant for potential Japanese intervention on Tuesday, following reports of Tokyo's involvement in the currency market on Monday, which propelled the Japanese Yen (JPY), according to Reuters. Lower-than-expected domestic Retail Trade data released on Tuesday support the dovish stance of the Bank of Japan (BOJ). Additionally, expectations for a sustained significant interest rate differential between Japan and other nations suggest that the trajectory of the JPY is biased toward further depreciation.

Daily Digest Market Movers: AUD/JPY edges lower after softer Retail Sales

The seasonally adjusted Australian Retail Sales dropped 0.4% MoM in March, compared to the expected increase of 0.2% and the previous growth of 0.3%.
China’s NBS Manufacturing Purchasing Managers Index (PMI) fell to 50.4 in April, against the 50.8 prior. The reading was better than the expected reading of 50.3. Non-manufacturing PMI declined to 51.2, as expected. The previous reading was 53.0 in March.
Japan’s Retail Trade increased by 1.2% year-over-year in March, which was lower than the expected increase of 2.5% and the previous increase of 4.7%. The seasonally adjusted Retail Trade (MoM) decreased by 1.2%, against the expected rise of 0.6%.
Australian shares kicked off Tuesday with little change as investors paused ahead of the upcoming US Federal Reserve rates decision on Wednesday. Among the 11 sectors, only materials showed gains, while the rest remained relatively unchanged.
Masato Kanda, Japan's senior currency diplomat, made pointed comments regarding the currency's impact on import prices, emphasizing its significant influence. He highlighted the readiness of authorities to take action around the clock to address currency-related matters, as per a Reuters report.
BoJ Governor Kazuo Ueda provided insights into the central bank's decision to maintain the status quo during the post-policy meeting press conference on Friday. Ueda outlined that the BoJ will adjust the degree of monetary easing if the underlying inflation rate rises. Additionally, he emphasized that easy financial conditions will be maintained for the time being, indicating the BoJ's commitment to supporting economic recovery and stability through accommodative monetary measures.

Technical Analysis: AUD/JPY drops toward 102.00

The AUD/JPY traded around 102.50 on Tuesday, hovering above the lower boundary of the ascending wedge on a daily chart. Additionally, the 14-day Relative Strength Index (RSI) is above the 50-level, reinforcing the bullish sentiment.

The immediate resistance is observed at the psychological level of 105.00, coinciding with the upper boundary of the wedge. A breakthrough above this area could propel the AUD/JPY cross to test the highest level of 105.43 recorded in April 2013.

On the downside, immediate support for the AUD/JPY pair might be encountered at the psychological level of 102.00, aligning with the lower boundary of the wedge. If the pair breaches below this level, it could lead to a further decline toward the nine-day Exponential Moving Average (EMA) at 101.51.

(This story was corrected on April 30 at 05:30 GMT to say, in the technical analysis, the lower boundary of the ascending wedge, not the triangle.)

AUD/JPY: Daily Chart

Japanese Yen price today

The table below shows the percentage change of the Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.08%	0.23%	0.19%	0.59%	0.38%	0.56%	0.22%
EUR	-0.09%		0.13%	0.10%	0.50%	0.36%	0.47%	0.13%
GBP	-0.22%	-0.15%		-0.03%	0.37%	0.16%	0.33%	0.00%
CAD	-0.19%	-0.11%	0.04%		0.39%	0.18%	0.37%	0.03%
AUD	-0.60%	-0.50%	-0.36%	-0.39%		-0.21%	-0.04%	-0.36%
JPY	-0.38%	-0.29%	-0.16%	-0.19%	0.21%		0.17%	-0.19%
NZD	-0.54%	-0.48%	-0.33%	-0.37%	0.04%	-0.17%		-0.34%
CHF	-0.21%	-0.15%	-0.01%	-0.05%	0.36%	0.18%	0.30%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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