AUD/JPY Holds at 99.90; PMI Reaches 24-Month High

Key Points:

• AUD/JPY at 99.90, with key support at 99.65 and resistance at 100.00; a 14-day RSI above 50 suggests bullish momentum.
• April’s Judo Bank Composite PMI reached 53.6, indicating robust economic activity and supporting AUD strength.

The AUD/JPY has demonstrated notable stability as of Tuesday, maintaining its gains from the previous session. A generally optimistic mood supporting the AUD, possibly fuelled by a relaxed geopolitical climate in the Middle East, can attribute this steadiness. The Australian Dollar’s positive response to geopolitical events shows resilience and robustness in the currency pair.

Economic Indicators: April PMI at 53.6, Signaling Expansion

April’s economic data from Australia highlighted a promising trend in economic activity. The Judo Bank Composite Purchasing Managers Index (PMI) for Australia climbed to 53.6. Consequently, this marks an increase from the previous month’s 53.3 and is the highest in 24 months. This indicates an accelerated expansion in Australia’s private sector, particularly in services. Such growth suggests a robust economic recovery phase, with the PMI as a critical barometer for economic health and likely influencing AUD strength.

Currency Challenges: Japan’s Yield Gap Dilemma

Japan faces a significant challenge with its expanding yield gap compared to other major economies. This widening gap has resulted in increased borrowing of JPY to invest in higher-yielding assets abroad, exerting pressure on the Yen. The phenomenon reflects broader economic trends and monetary policy decisions that could impact the JPY’s performance against currencies like the AUD, potentially leading to volatility based on shifts in investment flows.

BOJ’s Dovish Comments with Inflation Below 2% Target

In a recent statement, Bank of Japan Governor Kazuo Ueda highlighted the necessity of maintaining accommodative monetary policies. Citing inflation remains somewhat below the 2% target, the dovish comments were made during his speech on Friday. The central bank’s remarks may impact financial markets, particularly affecting Yen’s performance as investors recalibrate expectations for Japan’s economy.

AUD/JPY’s Technical Analysis: Bullish Trends with RSI Over 50

On Tuesday, the AUD/JPY trading rate was observed at 99.90. Analysts identified key support levels at the psychological level of 99.65, with additional levels at 99.50, 99.00, and 98.50. Resistance is found at a psychological level of 100.00 and major levels at 100.50 and 100.81. The 14-day Relative Strength Index (RSI) remains above 50, indicating a bullish sentiment. The currency pair navigates an ascending channel, with a potential upper boundary test if it breaks above 100.81, which could signal further bullish momentum.

Economic and Policy Factors Drive AUD/JPY Stability

The AUD/JPY currency pair exhibits a complex interplay of economic indicators, central bank policies, and technical factors. Stability and positive sentiment towards the AUD, coupled with Japan’s economic challenges and central bank dovishness, paint a multifaceted picture of potential future movements.