On the currency market, the AUD/JPY pair is gaining value today as a result of growing expectations of a hawkish monetary policy in Australia. Data on wage growth for the second quarter (3.4% y/y vs. the forecast 3.3%) not only exceeded analysts' expectations but also reinforced concerns about persistent inflationary pressure. The higher wage growth rate strengthens the Australian dollar and suggests that the RBA may hold off on deeper rate cuts or extend the period of restrictive policy, driving the AUD's appreciation against other currencies.
At the same time, the yen's weakness deepened after the publication of producer inflation data in Japan – PPI growth in July was only +0.2% m/m and +2.6% y/y, remaining below previous months and forecasts. The continuing downward trend in producer inflation points to limited cost pressures and strengthens the argument for the Bank of Japan to maintain its mild, ultra-expansionary monetary policy. This divergence in interest rate prospects in Australia and Japan is exacerbating the monetary differentiation between the two currencies. The result is clear support for AUD/JPY, which is gaining as a typical representative of a carry trade pair in a volatile global environment.
The AUDJPY pair resumes its upward trend marked by the 50-, 100- and 200-day exponential moving averages (blue, purple and gold curves on the chart, respectively). As long as trading remains above these zones, the technical trend is maintained. Looking at the Bollinger Bands, we can see that despite several consecutive days of gains, the quotes do not exceed 2 standard deviations of the range of quotes from the last 14 trading days. The RSI remains close to the 57.6 point zone, which is a neutral value. Source: xStation
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