AUD/JPY downtrend extended to four-straight days on Australia’s soft inflation data

The AUD/JPY extended its losses for the fourth straight trading day, due to overall Aussie’s Dollar (AUD) weakness, as the latest inflation report showed substantial progress. Hence, traders scale back tightening prospects by the Reserve Bank of Australia (RBA). At the time of writing, the AUD/JPY is trading at 97.37, down 0.05% in early Thursday’s Asian session.

Lower-than-expected inflation data in Australia leads to reduced expectations for RBA tightening, a headwind for AUD/JPY

On Wednesday, the Australian Bureau of Statistics (ABS) revealed the monthly Consumer Price Index (CPI) rose by 4.9% in October, slower than the 5.6% increase in September, below forecasts of 5.2%. Monthly based, CPI slid 0.3%, blamed on lower petrol prices.

Sources cited by Reuters noted, “The lower-than-expected October print is an early Christmas present for households and businesses... That should be enough to save the Reserve Bank Board from having to be the Grinch of Christmas when it meets next week.”

Early in the month, the Reserve Bank of Australia (RBA) decided to lift interest rates from 4.10% to 4.35% due to higher inflation levels. The RBA left the door open for further tightening, if necessary, to achieve its 2 to 3% inflation target.

Money market futures linked to the RBA’s monetary policy see the central bank holding policy steady, though there’s a 50% chance of a rate hike in the first half of 2024.

On the Japanese front, the economic docket would reveal a speech of the Bank of Japan (BoJ) official Nakamura and release of Industrial Production data, Retail Sales, and Consumer Confidence.

AUD/JPY Price Analysis: Technical outlook

The pair has formed a double top, achieving four straight days of losses, with the AUD/JPY drifting more than 100 pips of losses since reaching a weekly high of 98.49. Additionally, last Wednesday's CPI report was the catalyst to push prices below the Tenkan-Sen line at 97.68, which has exacerbated a drop toward 97.39, with sellers targeting the Senkou Span A at 97.04. Further downside risks lie below the November 21 swing low of 96.82, like the Kijun-Sen at 96.41.