The AUD/JPY Cross Continues to Decline as RBA Rate Cut Bets Increase

The AUD/JPY Cross Continues to Decline as RBA Rate Cut Bets Increase

The AUD/JPY cross is experiencing a decline for the third consecutive day, indicating vulnerability to further sliding. During the Asian session, spot prices dropped to a nearly one-month low, currently trading around the 96.20-96.15 area. Bears are now aiming to push prices below the 100-day Simple Moving Average (SMA), extending the downward trajectory.

The Australian Dollar (AUD) is being undermined by softer domestic consumer inflation figures, which were released on Wednesday. These figures have reaffirmed expectations that the Reserve Bank of Australia’s (RBA) tightening cycle is over. As a result, the August RBA rate cut bets have increased, putting additional pressure on the AUD/JPY cross.

The Bank of Japan (BoJ) recently signaled that conditions were favorable for phasing out huge stimulus and pulling short-term rates out of negative territory. This hawkish tilt has given a boost to the Japanese Yen (JPY) and caused it to outperform other currencies. Additionally, the risk of a major escalation of geopolitical tensions in the Middle East has further benefited the safe-haven JPY, contributing to the downward pressure on the AUD/JPY cross.

A private-sector survey revealed that China’s factory activity has expanded at a steady pace for the third consecutive month in January. However, the China-proxy Aussie has not been significantly affected by this news. China’s Caixin Manufacturing PMI remained unchanged at 50.8, compared to market expectations for a slight decrease to 50.6. Therefore, the positive data has done little to boost the AUD/JPY cross.

The downward movement of the AUD/JPY cross below the 100-day SMA suggests that the path of least resistance is to the downside. This indicates a high probability of a subsequent decline towards retesting the year-to-date trough, which is located around the 95.85 region.

The AUD/JPY cross is facing significant selling pressure for the third consecutive day. Weaker domestic inflation has increased the likelihood of an August RBA rate cut, thereby weakening the Australian Dollar. The hawkish tilt of the Bank of Japan, combined with geopolitical tensions, has strengthened the safe-haven Japanese Yen and added to the downward pressure on the AUD/JPY cross. Despite China’s steady factory activity, the China-proxy Aussie has not seen much improvement. The weakness below the 100-day SMA indicates a downward trajectory for the AUD/JPY cross, with a potential decline back towards the year-to-date trough. Traders and investors should closely monitor these factors for further insights into the AUD/JPY cross’s future movements.

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