AUD/JPY bulls cheer China-inspired optimism, mixed Japan data around 89.50

AUD/JPY grinds higher around 89.50 as bulls benefit from the cautious optimism in the market during the holiday season. In doing so, the cross-currency pair extends Friday’s gains to print the highest levels in one week, despite the latest retreat.

That said, the quote’s run-up could be linked to the risk-on mood in the market, mainly propelled by China, as well as receding hopes of the hawkish moves by the Bank of Japan (BOJ).

China scrapped the COVID quarantine rule for inbound travelers starting from January 08. The news joined geopolitical fears emanating from Russia and North Korea to portray cautious optimism in the market. As a result, S&P 500 Futures rise 0.60% intraday to 3,892 whereas the US 10-year Treasury yields remain sluggish at around 3.74% by the press time.

The recent comments from Bank of Japan (BOJ) Governor Haruhiko Kuroda and Japanese Prime Minister (PM) Fumio Kishida tried to tame the hawkish expectations from the central bank after it tweaked the monetary policy in the last week. That said, BOJ’s Kuroda stated that widening of yield band not a step toward easy policy exit. On the same line, Japanese PM Kishida ruled out expectations that the government-BOJ will revise the central bank statement.

Talking about the data, Japan’s Unemployment Rate eased to 3.5% in November versus 3.6% expected prior while the Jobs / Applicants Ratio reprinted 1.35 for the said month compared to 1.33 market forecasts. Further, Retail Trade growth eased to 2.6% YoY versus 2.8% consensus and 4.4% upwardly revised prior.

Moving on, a light calendar ahead of Saturday’s China official PMIs will join the year-end inaction in the market to restrict AUD/JPY moves.

Technical analysis

AUD/JPY recovery remains elusive unless providing a daily closing beyond the previous support line from early August, close to 91.20 by the press time.