AUD/JPY recovers from 4-1/2 month lows ahead of China data

AUD/JPY clocked 4-1/2 month low of 81.95 (also the 200-DMA yesterday) before recovering to 82.30 ahead of the China PPI and CPI release.

Peak inflation

The speculation is gathering pace that inflation may have peaked in China and across the advanced world. The Chinese Producer Price Index (PPI) is seen cooling to 7.6% y/y in March from February’s 7.8%.

The decline in the PPI would not only add credence to the peak inflation argument, but would also be a big blow to the great reflation trade, which in many people’s opinion was the result of a spike in Chinese PPI in mid-2016 and not due to Trump victory in the US elections.

A sharp drop in the Aussie Westpac Consumer Confidence in April failed to have any major impact on the pair. Meanwhile, the focus is also on the broader market sentiment and the resulting demand for the Japanese Yen.

AUD/JPY Technical Levels

A break above 82.61 (Nov 16 high) would expose resistance at 82.93 (5-DMA) and 83.25 (previous day’s high). On the lower side, breach of support at 81.95 (200-DMA) would open up downside towards 81.11 (Nov 18 low) and 81.64 (Nov 1 high).