AUD/JPY trades with modest losses below mid-96.00s, seems vulnerable near multi-week low

• AUD/JPY drifts lower for the third successive day and drops to a multi-week low. 
• Hawkish remarks by RBA’s Bullock boost the Aussie and lend support to the cross.
• Bets for another BoJ rate hike in 2024 underpin the JPY and cap any further gains.

The AUD/JPY cross remains under some selling pressure for the third successive day on Thursday and drops to a three-and-half-week low during the Asian session on Thursday. Spot prices currently trade just below mid-96.00s and seem vulnerable to prolong this week’s rejection slide from the key 200-day Simple Moving Average (SMA).

The Australian Dollar (AUD) did get a minor lift following Reserve Bank of Australia (RBA) Governor Michele Bullock’s hawkish remarks, saying that the board remains vigilant to upside risks to inflation and does not expect to be in a position to cut rates in the near term. That said, unimpressive Australian Trade Balance data, showing that the surplus rose to A$6,009 million in July amid a 0.8% fall in imports and a 7% increase in exports, keeps a lid on any meaningful appreciating move. 

Apart from this, expectations that the Bank of Japan (BoJ) will hike rates again in 2024, bolstered by data showing that real wages in Japan rose for the second straight month in July, continue to underpin the Japanese Yen (JPY) and further contribute to capping the upside for the AUD/JPY cross. Moreover, BoJ Board Member Hajime Takata said that the central bank must adjust monetary conditions by another gear if it can confirm that firms will continue to increase capital expenditure, wages, and prices.

Meanwhile, the cautious market mood is seen as another factor benefitting the JPY’s relative safe-haven status against its Australian counterpart. This, in turn, suggests that the path of least resistance for the AUD/JPY cross is to the downside and suggests that the the recent goodish recovery move from the vicinity of the 90.00 psychological mark, or over a one-year low touched in August has run out of steam already.