AUDJPY has been trading sideways in recent days but the pair may be heading for a breakout from this short-term lull today. Release of much better than expected official PMIs from China supported market sentiment during the Asian trading session and is also providing support for indices from the Old Continent at the beginning of the European cash session today. However, AUDJPY has already given back some gains following the initial rally as investors are having second thoughts.
There are 2 factors at play for AUDJPY today. The first one is the aforementioned release of official Chinese PMIs. The second one, is a release of not so encouraging data from the Australian economy. The Australian GDP report for Q4 2022 showed growth of 0.5% QoQ, which was weaker than the 0.7% QoQ median estimate from economists. Moreover, Australian CPI data for January showed a quite significant slowdown from 8.4 to 7.4% YoY while markets expected a deceleration to 8.1% YoY. Weaker than expected GDP growth and bigger than expected slowdown in CPI inflation gives Reserve Bank of Australia some room to justify slowing or pausing the rate hike cycle.
Taking a look at AUDJPY chart at D1 interval, we can see that the pair has been trading in a short-term upward channel since mid-December 2022. The pair made two attempts at breaking above the 93.00 resistance zone recently but have later pulled back following a failure. After around a week of trading sideways in the 91.70 area, we are seeing some action from AUDJPY bulls today. However, it should be noted that both - upper and lower - wicks of recent daily candlesticks have been quite large. This means that it cannot be ruled out that we will see reversal of today's gains later into the day and painting of another doji-like candlestick, signaling persisting indecisiveness.
Source: xStation5
